Cimarex Energy Reports Third Quarter 2014 Results

DENVER, Nov. 4, 2014 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2014 net income of $144.3 million, or $1.65 per diluted share.   This compares to 2013 third quarter net income of $138.4 million or $1.59 per diluted share.  Adjusted 2014 third quarter net income was $1.53 per diluted share⁽¹⁾.   Third quarter 2014 adjusted cash flow from operations was $439.7 versus $394.0 million a year ago⁽¹⁾.  Revenues from oil and gas sales for the third quarter totaled $636.5 million compared to $549.6 million in the same period of 2013. 

Production volumes averaged 942 million cubic feet equivalent (MMcfe) per day in the third quarter, a 31 percent increase over third quarter 2013 output of 717 MMcfe per day.  Oil production grew 10 percent to 43,376 barrels per day.  Natural gas production increased 35 percent to 468 MMcf per day.  Natural gas liquids (NGL) volumes of 35,627 barrels per day grew 59 percent.  Third quarter 2014 production volumes were 50 percent natural gas, 27 percent oil and 23 percent NGL. 

Third quarter production volumes were impacted by severe weather conditions in the Delaware Basin during September.  Heavy rains and flooding negatively impacted third quarter production by approximately 15 to 20 MMcfe per day (42 percent oil).  Partially offsetting this was better-than-expected production volumes from newly completed wells in the Mid-Continent.

Natural gas prices averaged $4.10 per thousand cubic feet (Mcf) in the quarter, up 10 percent year-over-year.  Oil prices averaged $87.27 per barrel, down 15 percent, and NGL prices averaged $34.08 per barrel.  (See table of Price and Production Data below.)

Total debt at September 30, 2014, consisted of $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and had a cash balance of $564 million.  Proceeds from property sales closed during the quarter totaled $454 million which, included $446 million from the sale of oil and gas properties and $8 million for gas gathering and processing assets. 

2014 Outlook

After adjusting for property sales (25-30 MMcfe per day) and weather-related production and well completion delays, fourth quarter 2014 volumes are projected to average 930-955 MMcfe per day.  Incorporating updated fourth quarter guidance, full year production is now estimated to average 864-870 MMcfe per day, a mid-point increase of 25 percent over 2013.  At the midpoint, year-over-year oil and natural gas volumes are now projected to grow approximately 16 and 23 percent, respectively, and NGL volumes are expected to increase 45 percent.

Capital investment budgeted for exploration and development for 2014 remains unchanged at $1.95 billion. Expenses per Mcfe of production for 2014 are estimated to be:

Operations Update

Cimarex invested $460 million on exploration and development during the third quarter, bringing the total invested in 2014 to $1.4 billion.   The Permian Basin has accounted for 72 percent of the capital investment year-to-date.

A total of 66 gross (36 net) wells were drilled during the quarter. At September 30, 52 gross (34 net) wells were awaiting completion.

Permian Basin Update

Production from the Permian Basin averaged 408.1 MMcfe per day in the third quarter, an increase of 16 percent over third quarter 2013 and a four percent increase sequentially.  Quarterly oil volumes increased seven percent year-over-year to 34,299 barrels per day and accounted for 50 percent of the region's total production for the quarter.

Cimarex drilled and completed 36 gross (27 net) Permian Basin wells during the third quarter, bringing the total for 2014 to 117 gross (78 net) wells.  Delays in completions, primarily the result of severe weather, caused an increase in the number of wells awaiting completion at September 30, to 43 gross (32 net) wells from 22 gross (18 net) wells at June 30. 

Year-to-date, 38 gross (19 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 1,056 barrels of oil equivalent (BOE) per day (70 percent oil).  Year-to-date Ward County, Texas, Third Bone Spring drilling totaled 11 gross (six net) wells with per well first 30-day average gross production rates of approximately 1,114 BOE per day (68 percent oil) from Cimarex-operated wells.  Culberson County Bone Spring wells total 11 gross (seven net) year-to-date with per well first 30-day average gross production rates of approximately 1,190 BOE per day (50 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 third quarter, the company drilled and completed 15 gross (12 net) Wolfcamp wells.  Of note, Cimarex has completed and is now producing from the third of its four downspacing pilots begun in 2014.  The Cleveland pilot, which is a four-well, 80-acre Wolfcamp A downspacing test in Reeves County, Texas, had per well first 30-day average gross production rates of approximately 1,029 BOE per day (49 percent oil).  Completion operations are underway on the fourth pilot which will also test downspacing in the Wolfcamp A in Reeves County.

Mid-Continent Update

Mid-Continent production averaged 517.9 MMcfe per day for the third quarter of 2014, a 53 percent increase over the third quarter 2013 average of 337.6 MMcfe per day.  The Cana-Woodford area represented 406.1 MMcfe per day, or 78 percent of Mid-Continent production in the third quarter.  Year-to-date Cimarex has drilled and completed 106 gross (43 net) wells in the region, 80 gross (36 net) of which were in the Cana-Woodford shale play. 

Cimarex currently has four rigs operating in the Mid-Continent region, two of which are drilling Cana-Woodford infill development wells.  One Meramec test is now drilling and three additional Meramec wells are in various stages of completion.    At September 30, nine gross (2.3 net) wells were awaiting completion. 

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

Other

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

Oil Contracts

Gas Contracts

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 $0.2 million and $6.0 million related to the third quarter and year-to-date, respectively.

Conference Call and Webcast

Cimarex will host a conference call tomorrow, November 5, at 9:00 a.m. Mountain Time (11:00 a.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 866-367-3053 five minutes before the scheduled start time (international callers dial 412-902-4216).  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. 10054032.  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 operations 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; severe weather; 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.

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:

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.

SOURCE Cimarex Energy Co.