Production of 839 MMcfe per day; Up 22% Year-over-Year
DENVER, Aug. 5, 2014 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported second quarter 2014 net income of $148.6 million, or $1.70 per diluted share. This compares to 2013 second quarter net income of $129.6 million, or $1.49 per diluted share. Adjusted 2014 second quarter net income was $1.71 per diluted share(1).
Production volumes averaged 839 million cubic feet equivalent (MMcfe) per day in the quarter, a 22 percent increase over second quarter 2013 output of 687 MMcfe per day. Oil production grew 13 percent over the same period last year to 41,759 barrels per day. Permian oil volumes were 33,317 barrels per day. Natural gas production increased 20 percent over last year to 410 MMcf per day. Cimarex reported NGL volumes of 29,680 barrels per day up 43 percent from 2013 levels as a result of more Permian Basin gas being fully processed. Second quarter 2014 production volumes were 49 percent natural gas, 30 percent oil and 21 percent NGL.
Growth in production and higher product prices resulted in revenues of $622.9 million in the second quarter of 2014 compared to $483.3 million in the same period of 2013. Second quarter 2014 adjusted cash flow from operations was $443.1 million versus $346.3 million a year ago(1).
Natural gas prices averaged $4.62 per thousand cubic feet (Mcf) in the quarter, up 13 percent year-over-year. Oil prices averaged $93.39 per barrel, up three percent from a year ago and NGL prices averaged $35.35 per barrel.
Long-term debt at June 30, 2014, consisted of $1.5 billion of senior notes. Cimarex had no borrowings under its senior unsecured revolving credit facility and had a cash balance of $129 million. Debt to total capitalization at June 30 was 26 percent(2).
2014 Outlook
Cimarex estimates 2014 production to average 860-875 MMcfe per day, a mid-point increase of 25 percent over 2013. Oil volumes are projected to grow 22-25 percent year-over-year. Third quarter 2014 volumes are projected to average 920-945 MMcfe per day.
Capital investment in exploration and development is now expected to be $1.95 billion due to slightly higher activity levels in the Mid-Continent.
Expenses per Mcfe of production for 2014 are estimated to be:
Production expense
$1.12 - $1.17
Transportation, processing and other expense
0.65 - 0.68
DD&A and ARO accretion
2.60 - 2.70
General and administrative expense
0.25 - 0.28
Taxes other than income (% of oil and gas revenue)
5.5 - 5.9%
Cimarex invested $498 million on exploration and development during the second quarter, bringing the total invested year-to-date to $964 million. The Permian Basin accounted for 71 percent of the capital investment in the first half of 2014 with the Mid-Continent representing the remainder. The company also purchased assets in the Cana-Woodford area for $238 million during the quarter.
Cimarex drilled a total of 85 gross (51 net) wells during the quarter. At quarter-end, 46 gross (25 net) wells were awaiting completion.
WELLS DRILLED AND COMPLETED BY REGION
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2014
2013
2014
2013
Gross wells
Permian Basin
47
55
81
90
Mid-Continent
37
35
76
87
Other
1
2
2
2
85
92
159
179
Net wells
Permian Basin
30
32
51
59
Mid-Continent
21
15
35
35
Other
-
1
1
1
51
48
87
95
% Gross wells completed as producers
99%
97%
99%
98%
Permian Basin Update
Production from the Permian Basin averaged 393.3 MMcfe per day in the second quarter, an increase of 23 percent over second quarter 2013 and a 13 percent increase sequentially. Quarterly oil volumes increased 11 percent year-over-year to 33,317 barrels per day and accounted for 51 percent of the region's total production for the quarter.
Cimarex drilled and completed 47 gross (30 net) Permian Basin wells during the second quarter, bringing the total for 2014 to 81 gross wells (51 net). At June 30, 22 gross (18 net) wells were awaiting completion.
Year-to-date, 32 gross (15 net) New Mexico Bone Spring wells have been drilled and completed. Per well first 30-day average gross production from the Cimarex-operated wells averaged approximately 905 barrels of oil equivalent (BOE) per day (79 percent oil). Year-to-date Ward County, Texas, Third Bone Spring drilling totaled seven gross (five net) wells with per well first 30-day average gross production rates of approximately 1,034 BOE per day (75 percent oil) from Cimarex-operated wells. Culberson County Bone Spring wells total nine gross (five net) year-to-date with per well first 30-day average gross production rates of approximately 1,170 BOE per day (60 percent oil).
In the Wolfcamp play, Cimarex continues to drill horizontal wells in multiple benches throughout its acreage in Culberson, Reeves and Ward Counties. In the second quarter, the company drilled and completed 26 gross (21 net) Wolfcamp wells including four long laterals to the Wolfcamp D in Culberson County. Of note, Cimarex has completed and is now producing from three of the four downspacing pilots begun in 2014.
Mid-Continent Update
Mid-Continent production averaged 425.5 MMcfe per day for the second quarter of 2014, a 24 percent increase over the second quarter 2013 average of 343.2 MMcfe per day. The Cana-Woodford area represented 309.7 MMcfe per day, or 73 percent of Mid-Continent production in the second quarter. Year-to-date Cimarex has drilled and completed 76 gross (35 net) wells in the region, 60 gross (31 net) of which were in the Cana-Woodford shale play. At June 30, 24 gross (7.5 net) wells were awaiting completion.
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,
2014
2013
2014
2013
Gas (MMcf per day)
Permian Basin
123.6
96.3
113.1
89.6
Mid-Continent
276.6
231.5
260.3
233.8
Other
9.9
13.5
9.4
13.7
410.1
341.3
382.8
337.1
Oil (Bbls per day)
Permian Basin
33,317
30,137
32,475
27,997
Mid-Continent
7,259
5,745
6,662
6,017
Other
1,183
996
1,334
1,012
41,759
36,878
40,471
35,026
NGL (Bbls per day)
Permian Basin
11,633
7,079
10,386
6,661
Mid-Continent
17,543
12,881
16,376
13,658
Other
504
745
605
812
29,680
20,705
27,367
21,131
Total Equivalent (MMcfe per day)
Permian Basin
393.3
319.6
370.3
297.5
Mid-Continent
425.5
343.2
398.5
351.9
Other
19.9
24.0
21.1
24.6
838.7
686.8
789.9
674.0
Other
The following table summarizes the company's current open hedge positions:
Oil Contracts
Weighted Ave. Price
Period
Type
Bbl/day
Index(3)
Floor
Ceiling
July 14 – Dec. 14
Collar
12,000
WTI
$
85.00
$
103.47
Gas Contracts
Weighted Ave. Price
Period
Type
MMBTU/day
Index(3)
Floor
Ceiling
July 14 – Dec. 14
Collar
80,000
PEPL
$
3.51
$
4.57
July 14 – Dec. 14
Collar
60,000
PermEP
$
3.62
$
4.50
Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method. Cash settlements on oil and natural gas collars resulted in payments of $1.0 million and $5.8 million related to the second quarter and year-to-date, respectively.
Conference Call and Webcast
Cimarex will host a conference call tomorrow, August 6, 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 412-317-0790). A replay will be available for one week following the call by dialing 877-344-7529 (international callers dial 412-317-0088); conference I.D. 10047717. The replay will also be available on the company's website or via the Cimarex App.
Investor Presentation
For more details, please refer to the company's updated investor presentation available on the Cimarex website at www.cimarex.com.
About Cimarex Energy Co.
Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production company with principal operating in the Mid-Continent and Permian Basin areas of the U.S.
Forward-Looking Statements
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 concentrated geographic areas; 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 $1,500 million divided by long-term debt of $1,500 million plus stockholders' equity of $4,287 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
For the Six Months Ended
June 30,
June 30,
2014
2013
2014
2013
(in thousands, net of tax, except per share data)
Net income
$
148,640
$
129,565
$
287,097
$
219,492
Mark-to-market (gain) loss on open derivative positions
904
(7,926)
7,790
(6,463)
Adjusted net income
$
149,544
$
121,639
$
294,887
$
213,029
Diluted earnings per share *
$
1.70
$
1.49
$
3.29
$
2.53
Adjusted diluted earnings per share *
$
1.71
$
1.40
$
3.38
$
2.46
Diluted shares attributable to common stockholders and participating securities
87,188
86,624
87,178
86,613
Estimated tax rates utilized
37.1%
37.2%
37.1%
37.2%
Adjusted net income and adjusted diluted earnings 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 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.
* Earnings per share are based on actual figures rather than the rounded figures presented.
RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2014
2013
2014
2013
(in thousands)
Net cash provided by operating activities
$
421,745
$
322,708
$
769,769
$
569,786
Change in operating assets and liabilities
21,367
23,601
82,235
68,944
Adjusted cash flow from operations
$
443,112
$
346,309
$
852,004
$
638,730
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,
2014
2013
2014
2013
Gas:
Total production (MMcf)
37,318
31,054
69,291
61,006
Daily production (MMcf)
410
341
383
337
Price (per Mcf)
$
4.62
$
4.08
$
4.94
$
3.73
Oil:
Total production (Bbls)
3,800,098
3,355,922
7,325,227
6,339,760
Daily production (Bbls)
41,759
36,878
40,471
35,026
Price (per Bbl)
$
93.39
$
90.72
$
92.82
$
88.65
NGLs:
Total production (Bbls)
2,700,915
1,884,189
4,953,394
3,824,763
Daily production (Bbls)
29,680
20,705
27,367
21,131
Price (per Bbl)
$
35.35
$
27.76
$
37.43
$
28.55
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2014
2013
2014
2013
(in thousands)
Acquisitions:
Proved
$
144,516
$
923
$
144,516
$
923
Unproved
114,732
3,415
114,732
3,665
259,248
4,338
259,248
4,588
Exploration and development:
Land and Seismic
43,869
36,719
109,194
68,029
Exploration and development
453,714
353,594
855,175
730,891
497,583
390,313
964,369
798,920
Sale proceeds:
Proved
(464)
(37,061)
(223)
(37,879)
Unproved
(900)
(960)
(900)
(1,041)
(1,364)
(38,021)
(1,123)
(38,920)
$
755,467
$
356,630
$
1,222,494
$
764,588
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2014
2013
2014
2013
(in thousands, except per share data)
Revenues:
Gas sales
$
172,503
$
126,547
$
342,600
$
227,668
Oil sales
354,882
304,466
679,953
561,998
NGL sales
95,470
52,309
185,427
109,184
Gas gathering and other, net
13,814
10,435
27,905
21,263
636,669
493,757
1,235,885
920,113
Costs and expenses:
Depreciation, depletion, amortization and accretion
198,639
150,115
375,788
288,952
Production
86,085
69,433
161,226
138,819
Transportation, processing, and other operating
46,478
22,022
90,726
40,656
Gas gathering and other
10,041
5,184
18,825
11,340
Taxes other than income
32,323
27,807
65,944
52,935
General and administrative
16,571
22,836
37,283
38,413
Stock compensation
3,548
3,507
7,272
7,112
(Gain) loss on derivative instruments, net
2,454
(13,660)
18,189
(12,057)
Other operating, net
112
2,365
215
5,297
396,251
289,609
775,468
571,467
Operating income
240,418
204,148
460,417
348,646
Other (income) and expense:
Interest expense
15,729
13,097
28,773
25,283
Amortization of deferred financing costs
995
1,015
1,993
2,035
Capitalized interest
(8,575)
(7,387)
(15,865)
(16,582)
Other, net
(4,129)
(8,758)
(11,084)
(11,374)
Income before income tax
236,398
206,181
456,600
349,284
Income tax expense
87,758
76,616
169,503
129,792
Net income
$
148,640
$
129,565
$
287,097
$
219,492
Earnings per share to common stockholders:
Basic
$
1.71
$
1.50
$
3.30
$
2.54
Diluted
$
1.70
$
1.49
$
3.29
$
2.53
Dividends per share
$
0.16
$
0.14
$
0.32
$
0.28
Shares attributable to common stockholders:
Unrestricted common shares outstanding
85,532
84,942
85,532
84,942
Diluted common shares
85,689
85,054
85,679
85,043
Shares attributable to common stockholders and participating securities:
