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Cimarex Energy Reports Third-Quarter 2012 Results

Date : 11/02/2012 @ 3:30PM
Source : PR Newswire (US)
Stock : Cimarex Energy (XEC)
Quote : 121.02  2.02 (1.70%) @ 3:30AM
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Cimarex Energy Reports Third-Quarter 2012 Results

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Cimarex Energy Reports Third-Quarter 2012 Results

DENVER, Nov. 2, 2012 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third-quarter 2012 net income of $84.3 million, or $0.97 per diluted share.  This compares to third-quarter 2011 earnings of $128.2 million, or $1.49 per diluted share. 

Third-quarter 2012 net income includes an unrealized non-cash loss on derivative instruments associated with 2012 oil hedges of $5.3 million, or $0.04 per share after-tax.  Third-quarter 2011 net income had an unrealized non-cash gain on derivative instruments associated with 2011 oil and gas hedges of $5.4 million, or $0.04 per share after-tax.

Third-quarter 2012 production volumes averaged an all-time high 635.1 million cubic feet equivalent (MMcfe), per day, a 7% increase as compared to third-quarter 2011 output of 592.0 MMcfe per day.  Oil production grew 23% to a record 32,456 barrels per day.  Permian Basin oil production grew 42% to 25,000 barrels per day.  Combined Permian and Mid-Continent third-quarter volumes averaged 598.8 MMcfe per day, growing 18% over the same period in 2011.  Total third-quarter 2012 production volumes were 51% gas, 31% oil and 18% natural gas liquids (NGL). 

Oil, gas and NGL revenue in the third quarter of 2012 totaled $397.4 million as compared to $419.7 million in the same period of 2011.  Third-quarter 2012 adjusted cash flow from operations was $291.2 million versus $356.8 million a year ago(1).    

The decrease in third-quarter revenues and cash flow is primarily a result of lower gas and NGL prices, partially offset by higher liquids production.  Third-quarter 2012 realized gas price fell 39% to $2.79 per thousand cubic feet (Mcf) and NGL prices dropped 34% to $28.55 per barrel, as compared to a year ago. Oil prices for the third quarter of 2012 averaged $88.18 per barrel flat with the third-quarter 2011 average price of $87.64 per barrel. 

For the nine months ended September 30, 2012, net income totaled $254.7 million, or $2.93 per diluted share, as compared to $413.1 million, or $4.79 per diluted share, for the first nine months of 2011.  Year-to-date through September 30, 2012 adjusted cash flow from operations totaled $834.6 million versus $1.0 billion for 2011(1). 

2012 Outlook
Total Company fourth-quarter 2012 volumes are estimated to average 652-677 MMcfe/d, an 8-13% increase over fourth-quarter 2011.  Fourth-quarter 2012 Permian Basin and Mid-Continent (PB/MC) production is expected to average 622-642 MMcfe/d, an increase of 17-21% over fourth-quarter 2011. Gulf Coast volumes are estimated to average 30-35 MMcfe/d for fourth-quarter 2012. 

The resulting full-year 2012, total Company volumes are projected to average 620-626 MMcfe/d, 5-6% growth over 2011.  PB/MC 2012 production volumes are projected to average 581-585 MMcfe/d, growing 19-20% over 2011.  Gulf Coast volumes are expected to average 39-41 MMcfe/d for 2012.

Full-year 2012 exploration and development (E&D) capital investment is expected to be approximately $1.6 billion. E&D capital for the first nine months of 2011 totaled $1.2 billion.

Expenses for 2012 are expected to fall within the following ranges:

Expenses ($/Mcfe):



Production expense

$1.11 -  $1.16


Transportation expense

  0.25  -  0.30


DD&A and ARO accretion

  2.35  -  2.45


General and administrative expense

  0.25  -  0.30


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

 6.0%  -  6.5%

 

Other
Long-term debt at September 30, 2012 was $830 million, comprised of $750 million 5.875% Senior Notes due in 2022 and $80 million of borrowings under its senior unsecured revolving credit facility. Debt to total capitalization ratio at quarter-end was 20% (4).  

Cimarex's hedge position is unchanged covering approximately 14,000 barrels of oil per day for the balance of 2012.  The following table summarizes the open hedge positions:

 

 Oil Contracts








Weighted Average Price

Period


Type


Daily Volume(2)


Index(3)


Floor


Ceiling

Months of  Oct.-Dec. 12


Collar


14,000


WTI


$

80.00


$

119.35














Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method.  Third-quarter 2012 had a non-cash mark-to-market loss of $5.3 million and no cash settlements.

Exploration and Development Activity
Cimarex's drilling activities are conducted within two main areas:  Permian Basin and Mid-Continent.  Permian activity is primarily directed to the Delaware Basin of southeast New Mexico and West Texas.  The majority of our Mid-Continent drilling is in the western Oklahoma Cana-Woodford shale. 

Cimarex drilled 253 gross (138 net) wells during the first nine months of 2012, completing 97% as producers.  Exploration and development capital for the year has totaled $1.2 billion.  Of total expenditures, 52% were invested in projects located in the Permian Basin; 44% in the Mid-Continent area; and 4% in the Gulf Coast and other.

 

Wells Drilled and Completed by Region







For the Three Months


For the Nine Months



Ended September 30,


Ended September 30,



2012

2011


2012

2011

Gross wells







Permian Basin


37

35


131

106

Mid-Continent


55

42


119

128

Gulf Coast/Other


1

5


3

8



93

82


253

242

Net wells







Permian Basin


24

23


88

79

Mid-Continent


23

20


49

52

Gulf Coast/Other


0

5


1

7



47

48


138

138

% Gross wells completed as producers


99%

94%


97%

95%

 

At quarter-end 39 net wells were drilled and awaiting completion: 28 Mid-Continent and 11 Permian Basin.  Cimarex currently has 19 operated rigs running; 14 in the Permian Basin and five in the Mid-Continent.  

Permian Basin
Cimarex drilled and completed 131 gross (88 net) Permian Basin wells during the first nine months of 2012, completing 96% as producers.  At quarter-end, 18 gross (11 net) wells were awaiting completion.  Drilling principally occurred in the Delaware Basin of Texas and southeast New Mexico, mainly targeting Bone Spring, Paddock and Wolfcamp formations.  Third-quarter 2012 Permian production averaged 274.5 MMcfe/d, an increase of 33% over third-quarter 2011, which included 42% growth in oil volumes to 25,000 barrels per day.

Year-to-date 2012 New Mexico Bone Spring wells drilled and completed totaled 48 gross (24 net).  Per-well 30-day gross production from the 2012 New Mexico Bone Spring wells averaged over 630 barrels equivalent (Boe) per day (86% oil).  Texas Third Bone Spring drilling totaled 28 gross (18 net) wells, which had per-well 30-day average gross production rates of over  1,000 barrels equivalent per day (80% oil).

Cimarex continues to evaluate the Wolfcamp shale in the Delaware Basin, primarily in southern Eddy County New Mexico (White City) and northern Culberson County Texas.   Year-to-date Cimarex has drilled and completed 11 gross (10 net) horizontal Wolfcamp wells, bringing total wells in the play to 29 gross (27 net).  Per well first-30 day production rates on all the wells drilled to date have averaged 6.4 MMcfe/d, comprised of 2.8 MMcf/d gas, 275 barrels per day of oil and 330 barrels per day of NGLs (assuming full NGL recovery), or 43% gas, 26% oil and 31% NGL. 

Mid-Continent
In the first nine months of 2012 Cimarex drilled and completed 119 gross (49 net) Mid-Continent wells.  At quarter-end, 64 gross (28 net) wells were awaiting completion.  Mid-Continent production averaged 324.3 MMcfe/d for the third quarter of 2012, a 7% increase over third-quarter 2011 average of 303.1 MMcfe/d. 

Essentially all this year's drilling activity has been in the Anadarko Basin, Cana-Woodford shale play, where Cimarex has drilled and completed 113 gross (47 net) wells. At September 30, 2012 there were 54 gross (24 net) Cana wells being completed or awaiting completion.  At year-end 2011 there were 13 gross (4.9 net) wells waiting on completion in Cana.  The increase in wells waiting on completion as compared to year-end is a result of commencing infill development drilling in 2012.

Since the Cana play began in late 2007, Cimarex has drilled or participated in 464 gross (177 net) wells.  Third-quarter 2012 net Cana production averaged 184.3 MMcfe/d, a 32% increase versus the third-quarter 2011 average of 139.2 MMcfe/d. 

Gulf Coast
Cimarex participated in three gross (0.8 net) outside operated Yegua/Cook Mountain wells in 2012, of which one gross well was successful.  Gulf Coast production averaged 35.1 MMcfe/d for the third quarter of 2012, a 57% decrease as compared to the third-quarter 2011 average of 81.8 MMcfe/d. The decreased output is a result of natural decline in highly-productive wells drilled near Beaumont, Texas.

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

 










For the Three Months Ended


For the Nine Months Ended


September 30,


September 30,


2012


2011


2012


2011

Gas (Mcf per day)








Permian Basin

79,502


76,872


78,007


72,150

Mid-Continent

224,009


209,459


218,411


197,688

Gulf Coast/Other

20,735


43,334


24,110


57,513


324,246


329,665


320,528


327,351









Oil (Barrels per day)








Permian Basin

25,000


17,578


22,839


15,977

Mid-Continent

6,120


5,720


5,802


5,641

Gulf Coast/Other

1,336


2,986


1,602


4,954


32,456


26,284


30,243


26,572

NGL (Barrels per day)








Permian Basin

7,501


3,921


6,523


3,231

Mid-Continent

10,598


9,885


9,934


8,866

Gulf Coast/Other

1,261


3,632


1,487


4,981


19,360


17,438


17,944


17,078

Total Equivalent (Mcfe per day)








Permian Basin

274,508


205,866


254,179


187,398

Mid-Continent

324,317


303,089


312,827


284,730

Gulf Coast/Other

36,318


83,045


42,644


117,127


635,143


592,000


609,650


589,255

 

Conference call and web cast
Cimarex will also host a conference call today at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time).  To access the live, interactive call, please dial (877) 789-9039 and reference call ID # 37850869 ten minutes before the scheduled start time.  A digital replay will be available for one week following the live broadcast at (855) 859-2056 and by using the conference ID # 37850869.  The listen-only web cast of the call will be accessible via 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 communication contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995.  These statements are based on current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are more fully described in SEC reports filed by Cimarex. While Cimarex makes these forward-looking statements in good faith, management cannot guarantee that anticipated future results will be achieved. Cimarex assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law. 

(1) Adjusted cash flow from operations is a non-GAAP financial measure.  See below for a reconciliation of the related amounts.

(2) Average daily volume in barrels per day.

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

(4) Reconciliation of pro forma debt to total capitalization, which is a non-GAAP measure, is: pro forma long-term debt of $830 million divided by long-term debt of $830 million plus stockholders' equity of $3,377.9 million.

 











RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS




For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,




2012


2011


2012


2011




(in thousands)

Net cash provided by operating activities

$

261,216

$

332,432

$

836,148

$

971,523


Change in operating assets










    and liabilities


29,957


24,372


(1,509)


33,264











Adjusted cash flow from operations

$

291,173

$

356,804

$

834,639

$

1,004,787











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 Nine Months Ended




September 30,


September 30,




2012


2011


2012


2011












 Total gas production - Mcf 


29,830,627


30,329,145


87,824,541


89,366,754


 Gas volume - Mcf per day 


324,246


329,665


320,528


327,351


 Gas price - per Mcf  


$2.79


$4.57


$2.71


$4.59












 Total oil production - barrels 


2,985,956


2,418,141


8,286,503


7,254,247


 Oil volume - barrels per day 


32,456


26,284


30,243


26,572


 Oil price - per barrel 


$88.18


$87.64


$91.67


$93.08












 Total NGL production - barrels 


1,781,139


1,604,337


4,916,753


4,662,376


 NGL volume - barrels per day  


19,360


17,438


17,944


17,078


 NGL price - per barrel 


$28.55


$43.11


$31.35


$42.99





















OIL AND GAS CAPITALIZED EXPENDITURES




For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,




2012


2011


2012


2011




(in thousands)


Acquisitions:










Proved

$

$

12,439

$

$

21,604


Unproved


4,636


8,380


11,349


20,427




4,636


20,819


11,349


42,031


Exploration and development:










Land and Seismic


28,226


61,907


86,613


146,832


Exploration and development


389,989


360,733


1,120,740


1,032,794




418,215


422,640


1,207,353


1,179,626


Sale proceeds:










Proved


(10,894)


(83,709)


(11,079)


(102,192)


Unproved



(150)


(1,088)


(1,971)




(10,894)


(83,859)


(12,167)


(104,163)



$

411,957

$

359,600

$

1,206,535

$

1,117,494

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)























For the Three Months Ended

For the Nine Months Ended









September 30,


September 30,









2012


2011


2012


2011









(In thousands, except per share data)
















Revenues:












Gas sales



$

83,208

$

138,631

$

238,102

$

410,331


Oil sales




263,315


211,928


759,609


675,239


NGL sales



50,860


69,169


154,160


200,428


Gas gathering, processing and other, net


9,529


14,081


31,199


41,620









406,912


433,809


1,183,070


1,327,618

Costs and expenses:










Depreciation, depletion, amortization and accretion


139,499


108,259


384,964


287,777


Production



62,699


62,333


192,818


181,558


Transportation


14,481


13,754


40,966


41,559


Gas gathering and processing


5,496


6,263


15,302


17,472


Taxes other than income


24,095


30,533


72,738


98,625


General and administrative


14,742


9,390


41,523


34,734


Stock compensation, net


8,301


4,595


17,519


13,962


(Gain) loss on derivative instruments, net


5,329


(7,120)


(661)


(11,353)


Other operating, net


2,236


2,379


7,295


8,095









276,878


230,386


772,464


672,429
















Operating income


130,034


203,423


410,606


655,189
















Other (income) and expense:










Interest expense 


12,191


7,278


32,852


22,192


Amortization of deferred financing costs


1,032


2,001


2,718


5,407


Capitalized interest


(9,231)


(7,253)


(26,154)


(21,830)


Loss on early extinguishment of debt




16,214



Other, net




(6,159)


(3,604)


(18,714)


(7,226)
















Income before income tax


132,201


205,001


403,690


656,646

Income tax expense


47,939


76,849


149,019


243,583
















Net income



$

84,262

$

128,152

$

254,671

$

413,063
















Earnings per share to common stockholders:

























Basic 




$

0.97

$

1.49

$

2.94

$

4.81


Diluted




$

0.97

$

1.49

$

2.93

$

4.79
















Dividends per share

$

0.12

$

0.10

$

0.36

$

0.30
















Shares attributable to common stockholders:










Unrestricted common shares outstanding


84,681


83,736


84,681


83,736


Diluted common shares


84,997


84,115


85,021


84,151
















Shares attributable to common stockholders and participating securities:










Basic shares outstanding


86,589


85,806


86,589


85,806


Fully diluted shares 


86,905


86,185


86,929


86,221
















Comprehensive income:










Net income


$

84,262

$

128,152

$

254,671

$

413,063


Other comprehensive income:











Change in fair value of investments, net of tax 


238


(585)


502


(417)


Total comprehensive income

$

84,500

$

127,567

$

255,173

$

412,646


 

CONDENSED CASH FLOW STATEMENTS (unaudited)





















For the Three Months Ended

For the Nine Months Ended









September 30,

September 30,









2012

2011

2012

2011









(In thousands)













Cash flows from operating activities:






Net income

$

84,262

$

128,152

$

254,671

$

413,063


Adjustment to reconcile net income to net cash 

provided by operating activities:








Depreciation, depletion, amortization and accretion

139,499

108,259

384,964

287,777




Deferred income taxes

49,568

120,930

150,648

288,986




Stock compensation, net

8,301

4,595

17,519

13,962




Derivative instruments, net

5,329

(5,373)

(661)

(7,536)




Loss on early extinguishment of debt

16,214




Changes in non-current assets and liabilities

2,815

(840)

7,930

3,719




Amortization of deferred financing costs and other, net

1,399

1,081

3,354

4,816


Changes in operating assets and liabilities:








(Increase) decrease in receivables, net

(83,436)

(49,778)

24,398

(32,229)




Decrease in other current assets

13,673

40,430

8,763

30,736




Increase (decrease) in accounts payable and accrued liabilities

39,806

(15,024)

(31,652)

(31,771)






Net cash provided by operating activities

261,216

332,432

836,148

971,523

Cash flows from investing activities:






Oil and gas expenditures

(423,134)

(453,375)

(1,181,742)

(1,152,676)


Sales of oil and gas assets

10,894

83,859

12,167

104,163


Sales of other assets

142

111,495

550

111,837


Other expenditures

(16,826)

(17,161)

(42,913)

(70,050)






Net cash used by investing activities

(428,924)

(275,182)

(1,211,938)

(1,006,726)

Cash flows from financing activities:






Net increase in bank debt

80,000

25,000


Increase in other long-term debt

750,000


Decrease in other long-term debt

(363,595)


Financing costs incurred

(1,129)

(7,248)

(13,821)

(7,348)


Dividends paid

(10,330)

(8,583)

(29,199)

(23,998)


Issuance of common stock and other

7,646

2,591

10,410

9,583




Net cash provided by (used in) financing activities

76,187

(13,240)

378,795

(21,763)

Net change in cash and cash equivalents

(91,521)

44,010

3,005

(56,966)

Cash and cash equivalents at beginning of period

96,932

13,150

2,406

114,126

Cash and cash equivalents at end of period

$

5,411

$

57,160

$

5,411

$

57,160

 

CONDENSED BALANCE SHEETS (unaudited)










September 30,


December 31,

Assets


2012


2011









(In thousands, except share data)

Current assets:







Cash and cash equivalents

$

5,411

$

2,406


Receivables, net


335,011


359,409


Oil and gas well equipment and supplies


77,879


85,141


Deferred income taxes


2,126


2,723


Derivative instruments


416



Other current assets


6,715


8,216



Total current assets


427,558


457,895

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






Proved properties


11,116,783


9,933,517


Unproved properties and properties under development,







not being amortized


661,626


607,219









11,778,409


10,540,736


Less – accumulated depreciation, depletion and amortization


(6,767,943)


(6,414,528)



Net oil and gas properties


5,010,466


4,126,208

Fixed assets, net


134,776


118,215

Goodwill





691,432


691,432

Other assets, net


49,023


34,827








$

6,313,255

$

5,428,577

Liabilities and Stockholders' Equity





Current liabilities:






Accounts payable

$

64,988

$

79,788


Accrued liabilities


434,966


385,651


Derivative instruments



245


Revenue payable


151,798


150,655



Total current liabilities


651,752


616,339

Long-term debt



830,000


405,000

Deferred income taxes


1,128,642


974,932

Other liabilities 



324,914


301,693



Total liabilities


2,935,308


2,297,964

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,







86,540,753 and 85,774,084 shares issued, respectively


865


858


Paid-in capital


1,931,583


1,908,506


Retained earnings


1,445,011


1,221,263


Accumulated other comprehensive income (loss)


488


(14)









3,377,947


3,130,613








$

6,313,255

$

5,428,577

 

SOURCE Cimarex Energy Co.

Copyright 2012 PR Newswire



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