NEWS
Cimarex Energy Co. 1700 Lincoln Street, Suite 1800 Denver, CO 80203 Phone: (303) 295-3995 |
Cimarex Reports Second-Quarter 2009 Financial Results
DENVER, August 7, 2009 - Cimarex Energy Co. (NYSE: XEC) today reported second-quarter 2009 financial and operating results. For the quarter, Cimarex reported net income of $38.8 million, or $0.46 per share. This compares to second-quarter 2008 earnings of $229.0 million, or $2.65 per diluted share.
Revenues from oil and gas sales in the second quarter of 2009 were $213.4 million, a 64% decrease as compared to $588.7 million in the same period of 2008. Second-quarter 2009 cash flow from operations totaled $153.1 million versus $435.8 million in the same period of 2008(1).
The decrease in second-quarter 2009 revenues, earnings and cash flow is primarily a result of lower oil and gas prices. Second-quarter 2009 gas prices decreased 67% to $3.48 per thousand cubic feet (Mcf) and oil fell 55% to $54.61 per barrel from the same period of 2008.
Second-quarter 2009 results contained certain non-cash charges, including a $3.7 million non-cash mark-to-market unrealized loss on derivatives ($2.4 million after tax) and a $6.3 million impairment of well equipment and supplies ($4.0 million after tax). Also included in the 2009 second-quarter results was a $3.5 million accrued charge for early cancellation of a rig contract ($2.2 million after tax).
Second-quarter 2009 oil and gas production averaged 453.9 million cubic feet equivalent per day (MMcfe/d), comprised of 317.7 million cubic feet of gas and 22,706 barrels of oil. Reflecting our planned reduction in drilling, daily production decreased 7% from a year-earlier. Cimarex’s second-quarter 2009 operated rig count averaged six as compared to 37 in the comparable period of 2008.
For the first six months of 2009, Cimarex had a net loss of $455.3 million, or $5.58 per share, as compared to net income of $378.6 million, or $4.37 per share, for the comparable period of 2008. The net loss for 2009 was primarily a result of an after-tax non-cash oil and gas asset impairment charge of $501.8 million, during the first quarter.
1
Capital
Second-quarter 2009 exploration and development (E&D) capital totaled $98.7 million down from $359.9 million in the second quarter of 2008. In the second quarter of 2009, Cimarex drilled 24 gross (11 net) wells, completing 96% as producers.
For the first half of 2009, E&D capital expenditures were $240.7 million versus $666.9 million during the first six months of 2008. During the first half of 2009 we drilled 74% fewer wells as compared to 2008.
Exploration and development capital investment for the remainder of 2009 is targeted to be generally within cash flow. At the present time, based on current market prices and service costs, we expect that 2009 capital expenditures will range from $500-$600 million.
Other
Cimarex has NYMEX oil and Mid-Continent natural gas hedge contracts covering oil and gas production from July 2009 through December 2010. The following table summarizes current commodity hedging transactions:
Weighted Average Price | |||||||||||||
Period | Commodity | Volume/Day | Settlement | Floor | Ceiling | ||||||||
2009 Jul – Dec | Gas | 147,000 MMBtu | Mid-Continent | $ | 3.00 | $ | 5.00 | ||||||
2010 Jan – Dec (2) | Gas | 100,000 MMBtu | Mid-Continent | $ | 5.00 | $ | 6.62 | ||||||
2010 Jan – Dec (2) | Oil | 8,000 Barrels | NYMEX | $ | 60.03 | $ | 90.58 | ||||||
Swap Price | |||||||||||||
2010 Jan – Dec (2) | Gas | 40,000 MMBtu | Mid-Continent | $ | 5.18 |
Cimarex accounts for these financial commodity derivative contracts using the mark-to-market accounting method.
Cimarex’s bank borrowings at the end of the second-quarter were $339 million, slightly lower than the March 31, 2009 balance of $345 million. Total long-term debt at the end of the second quarter was $706.7 million. As of June 30, 2009, our debt to total capitalization ratio was 27% (3).
Outlook
Based on current drilling and completion activity, third-quarter 2009 production is projected to range between 435-450 MMcfe/d. Our full-year 2009 production estimate is projected to be in the range of 450-465 MMcfe/d.
Expenses for the remainder of 2009 are expected to fall within the following ranges:
Expenses ($/Mcfe):
Production expense | $ | 1.15 - $1.25 | ||
Transportation expense | 0.17 - 0.22 | |||
DD&A and ARO accretion | 1.40 - 1.70 | |||
General and administrative expense | 0.22 - 0.28 | |||
Taxes other than income (% of oil and gas revenue) | 7.0% - 8.0 | % |
Conference call and web cast
Cimarex will host a follow-up conference call today at 10:00 a.m. Mountain Time (12:00 p.m. Eastern Time). To access the live, interactive call, please dial (800) 921-0061 and reference call ID # 20269256 ten minutes before the scheduled start time. A digital replay will be available for one week following the live broadcast at (800) 642-1687 and by using the conference ID # 20269256. The listen-only web cast of the call will be accessible via www.cimarex.com.
(1) | Cash flow from operations is a non-GAAP financial measure. See below for a reconciliation of the related amounts. |
(2) | Calendar 2010 Mid-Continent gas collar of 10,000 MMBtu per day, Mid-Continent swaps and NYMEX oil collars of 3,000 barrels per day were entered into subsequent to June 30, 2009. |
(3) | Reconciliation of debt to total capitalization, which is a non-GAAP measure, is: long-term debt of $706.7 million divided by long-term debt of $706.7 million plus stockholders’ equity of $1,892.5 million. |
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, Permian Basin and Gulf Coast 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.
FOR FURTHER INFORMATION CONTACT
Cimarex Energy Co.
Mark Burford, Director of Capital Markets
303-295-3995
www.cimarex.com
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three Months Ended | For the Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
(in thousands) | (in thousands) | ||||||||||||||
Net cash provided by operating activities | $ | 111,790 | $ | 382,307 | $ | 194,346 | $ | 697,552 | |||||||
Change in operating assets and liabilities | 41,318 | 53,503 | 96,408 | 73,020 | |||||||||||
Cash flow from operations | $ | 153,108 | $ | 435,810 | $ | 290,754 | $ | 770,572 |
Management believes that the non-GAAP measure of 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. 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, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Total gas production - Mcf | 28,909,821 | 32,172,121 | 59,375,158 | 63,081,660 | ||||||||||||
Gas volume - Mcf per day | 317,690 | 353,540 | 328,040 | 346,603 | ||||||||||||
Gas price - per Mcf | $ | 3.48 | $ | 10.57 | $ | 3.66 | $ | 9.49 | ||||||||
Total oil production - barrels | 2,066,219 | 2,044,831 | 4,323,936 | 4,115,688 | ||||||||||||
Oil volume - barrels per day | 22,706 | 22,471 | 23,889 | 22,614 | ||||||||||||
Oil price - per barrel | $ | 54.61 | $ | 121.64 | $ | 44.74 | $ | 107.93 |
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Acquisitions: | ||||||||||||||||
Proved | $ | 49 | $ | 324 | $ | 124 | $ | 1,369 | ||||||||
Unproved | — | — | — | — | ||||||||||||
49 | 324 | 124 | 1,369 | |||||||||||||
Exploration and development: | ||||||||||||||||
Land and Seismic | 10,757 | 33,955 | 27,036 | 57,126 | ||||||||||||
Exploration and development | 87,948 | 325,943 | 213,700 | 609,727 | ||||||||||||
98,705 | 359,898 | 240,736 | 666,853 | |||||||||||||
Sale proceeds: | ||||||||||||||||
Proved | (14,664 | ) | — | (15,394 | ) | — | ||||||||||
Unproved | — | — | (3,034 | ) | — | |||||||||||
(14,664 | ) | — | (18,428 | ) | — | |||||||||||
$ | 84,090 | $ | 360,222 | $ | 222,432 | $ | 668,222 |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 (1) | 2009 | 2008 (1) | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues: | ||||||||||||||||
Gas sales | $ | 100,539 | $ | 339,965 | $ | 217,163 | $ | 598,920 | ||||||||
Oil sales | 112,829 | 248,741 | 193,434 | 444,191 | ||||||||||||
Gas gathering, processing and other | 9,363 | 27,733 | 20,433 | 49,571 | ||||||||||||
Gas marketing, net | (46 | ) | 604 | 834 | 1,571 | |||||||||||
222,685 | 617,043 | 431,864 | 1,094,253 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Impairment of oil and gas properties | — | — | 791,137 | — | ||||||||||||
Depreciation, depletion, amortization and accretion | 58,981 | 135,063 | 151,192 | 262,213 | ||||||||||||
Production | 46,031 | 49,092 | 96,445 | 101,144 | ||||||||||||
Transportation | 7,764 | 10,621 | 16,473 | 18,930 | ||||||||||||
Gas gathering and processing | 4,411 | 13,021 | 9,517 | 23,196 | ||||||||||||
Taxes other than income | 15,252 | 39,749 | 30,797 | 70,356 | ||||||||||||
General and administrative | 9,519 | 13,876 | 17,281 | 25,460 | ||||||||||||
Stock compensation, net | 2,097 | 2,366 | 4,354 | 4,641 | ||||||||||||
Loss on derivative instruments, net | 358 | — | 256 | — | ||||||||||||
Other operating, net | 6,091 | 85 | 16,183 | 1,121 | ||||||||||||
150,504 | 263,873 | 1,133,635 | 507,061 | |||||||||||||
Operating income (loss) | 72,181 | 353,170 | (701,771 | ) | 587,192 | |||||||||||
Other (income) and expense: | ||||||||||||||||
Interest expense | 9,737 | 7,741 | 17,693 | 16,154 | ||||||||||||
Amortization of deferred financing costs | 1,517 | 281 | 1,828 | 565 | ||||||||||||
Capitalized interest | (5,422 | ) | (4,653 | ) | (10,935 | ) | (9,259 | ) | ||||||||
Other, net | 5,535 | (5,507 | ) | 7,890 | (8,524 | ) | ||||||||||
Income (loss) before income tax | 60,814 | 355,308 | (718,247 | ) | 588,256 | |||||||||||
Income tax expense (benefit) | 22,007 | 126,295 | (262,954 | ) | 209,705 | |||||||||||
Net income (loss) | $ | 38,807 | $ | 229,013 | $ | (455,293 | ) | $ | 378,551 | |||||||
Earnings (loss) per share to common stockholders (2): | ||||||||||||||||
Basic | $ | 0.46 | $ | 2.73 | $ | (5.58 | ) | $ | 4.52 | |||||||
Diluted | $ | 0.46 | $ | 2.65 | $ | (5.58 | ) | $ | 4.37 | |||||||
Dividends per share | $ | 0.06 | $ | 0.06 | $ | 0.12 | $ | 0.12 |
(1) | Effective January 1, 2009, we adopted the Financial Accounting Standards Board's (FASB) Staff Position (No. APB 14-1), Accounting for Convertible Debt Instrument That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The requirements are to be applied retrospectively to previously issued convertible instruments. These changes resulted in additional non-cash interest expense of approximately $0.46 million and $0.93 million applied retrospectively to the second quarter of 2008 and first half of 2008, respectively. In addition, long-term debt at December 31, 2008 was decreased by $3.6 million, deferred income tax liability increased by $1.3 million and stockholder's equity increased by $2.3 million. |
(2) | Effective January 1, 2009, we adopted the FASB's Staff Position (FSP) on the Emerging Issues Task Force (EITF) Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities". The FSP requires that all unvested share-based payment awards that contain non-forfeitable rights to dividends should be included in computing earnings per share using the two-class earnings allocation method. Prior-year earnings per share numbers have been adjusted retrospectively on a basis consistent with 2009 reporting. Amounts shown exclude amounts attributable to unvested shares and units which are "participating securities". |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Attributable to common stockholders (1): | ||||||||||||||||
Net income (loss) | $ | 38,807 | $ | 229,013 | $ | (455,293 | ) | 378,551 | ||||||||
Less dividends to unvested shares and restricted stock units | (141 | ) | (130 | ) | (282 | ) | (260 | ) | ||||||||
Less earnings attributable to unvested shares and restricted stock units | (945 | ) | (5,793 | ) | — | (2) | (9,531 | ) | ||||||||
Earnings (loss) to common stockholders (3) | $ | 37,721 | $ | 223,090 | $ | (455,575 | ) | $ | 368,760 | |||||||
Earnings (loss) to common stockholders (3): | ||||||||||||||||
Basic | ||||||||||||||||
Undistributed | $ | 32,823 | $ | 218,195 | $ | (465,370 | ) | $ | 358,982 | |||||||
Distributed (dividends) | 4,898 | 4,895 | 9,795 | 9,778 | ||||||||||||
Earnings (loss) | 37,721 | 223,090 | $ | (455,575 | ) | $ | 368,760 | |||||||||
Diluted | ||||||||||||||||
Basic undistributed | $ | 32,823 | $ | 218,195 | $ | (465,370 | ) | $ | 358,982 | |||||||
Adjustment for dilution | 4 | 189 | — | (2) | 315 | |||||||||||
Undistributed | 32,827 | 218,384 | (465,370 | ) | 359,297 | |||||||||||
Distributed (dividends) | 4,899 | 4,899 | 9,795 | 9,787 | ||||||||||||
Earnings (loss) | $ | 37,726 | $ | 223,283 | $ | (455,575 | ) | $ | 369,084 | |||||||
Earnings (loss) per share to common stockholders (3): | ||||||||||||||||
Basic | ||||||||||||||||
Undistributed | $ | 0.40 | $ | 2.67 | $ | (5.70 | ) | $ | 4.40 | |||||||
Distributed (dividends) | 0.06 | 0.06 | 0.12 | 0.12 | ||||||||||||
Total | $ | 0.46 | $ | 2.73 | $ | (5.58 | ) | $ | 4.52 | |||||||
Diluted | ||||||||||||||||
Undistributed | $ | 0.40 | $ | 2.59 | $ | (5.70 | ) | $ | 4.25 | |||||||
Distributed (dividends) | 0.06 | 0.06 | 0.12 | 0.12 | ||||||||||||
Total | $ | 0.46 | $ | 2.65 | $ | (5.58 | ) | $ | 4.37 | |||||||
Shares attributable to common stockholders (3): | ||||||||||||||||
Common shares outstanding | 81,701 | 81,572 | 81,701 | 81,572 | ||||||||||||
Diluted common shares outstanding (2) | 82,047 | 84,402 | 81,701 | 84,438 |
(1) | Effective January 1, 2009, we adopted the FASB's Staff Position (FSP) on the Emerging Issues Task Force (EITF) Issue No. 03-6-1, "Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities". The FSP requires that all unvested share-based payment awards that contain non-forfeitable rights to dividends should be included in computing earnings per share using the two-class earnings allocation method. Prior-year earnings per share numbers have been adjusted retrospectively on a basis consistent with 2009 reporting. |
(2) | Neither potential common shares nor the effects of unvested shares and restricted stock units are included in the diluted computations when a loss from continuing operations exist. |
(3) | Amounts shown exclude amounts attributable to unvested shares and units which are "participating securities". |
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2009 | 2008 (1) | 2009 | 2008 (1) | |||||||||||||
(In thousands) | ||||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 38,807 | $ | 229,013 | $ | (455,293 | ) | $ | 378,551 | |||||||
Adjustment to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Impairments | 6,343 | — | 801,905 | — | ||||||||||||
Depreciation, depletion, amortization and accretion | 58,981 | 135,063 | 151,192 | 262,213 | ||||||||||||
Deferred income taxes | 35,632 | 68,630 | (234,120 | ) | 124,122 | |||||||||||
Stock compensation, net | 2,097 | 2,366 | 4,354 | 4,641 | ||||||||||||
Derivative instruments, net | 3,727 | — | 3,625 | — | ||||||||||||
Changes in non-current assets and liabilities | 1,453 | 177 | 5,879 | 239 | ||||||||||||
Amortization of deferred financing costs and other, net | 6,068 | 561 | 13,212 | 806 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
(Increase) decrease in receivables, net | (10,925 | ) | (62,488 | ) | 76,306 | (103,137 | ) | |||||||||
(Increase) decrease in other current assets | (2,256 | ) | (39,610 | ) | (26,000 | ) | (46,047 | ) | ||||||||
Increase (decrease) in accounts payable and accrued liabilities | (28,137 | ) | 48,595 | (146,714 | ) | 76,164 | ||||||||||
Net cash provided by operating activities | 111,790 | 382,307 | 194,346 | 697,552 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Oil and gas expenditures | (95,193 | ) | (356,786 | ) | (292,742 | ) | (641,067 | ) | ||||||||
Proceeds from sale of assets | 14,739 | 250 | 18,563 | 354 | ||||||||||||
Sales of short-term investments | 307 | 2,061 | 1,230 | 7,061 | ||||||||||||
Other expenditures | (2,760 | ) | (12,092 | ) | (10,727 | ) | (21,086 | ) | ||||||||
Net cash used by investing activities | (82,907 | ) | (366,567 | ) | (283,676 | ) | (654,738 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Net increase (decrease) in bank debt | (6,000 | ) | — | 119,000 | — | |||||||||||
Financing costs incurred | (17,959 | ) | (50 | ) | (17,961 | ) | (50 | ) | ||||||||
Dividends paid | (5,036 | ) | (5,021 | ) | (10,076 | ) | (9,974 | ) | ||||||||
Issuance of common stock and other | 114 | 10,845 | 114 | 12,961 | ||||||||||||
Net cash provided by (used in) financing activities | (28,881 | ) | 5,774 | 91,077 | 2,937 | |||||||||||
Net change in cash and cash equivalents | 2 | 21,514 | 1,747 | 45,751 | ||||||||||||
Cash and cash equivalents at beginning of period | 2,958 | 147,287 | 1,213 | 123,050 | ||||||||||||
Cash and cash equivalents at end of period | $ | 2,960 | $ | 168,801 | $ | 2,960 | $ | 168,801 |
(1) | Effective January 1, 2009, we adopted the Financial Accounting Standards Board's (FASB) Staff Position (No. APB 14-1), Accounting for Convertible Debt Instrument That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The requirements are to be applied retrospectively to previously issued convertible instruments. These changes resulted in additional non-cash interest expense of approximately $0.46 million and $0.93 million applied retrospectively to the second quarter of 2008 and first half of 2008, respectively. In addition, long-term debt at December 31, 2008 was decreased by $3.6 million, deferred income tax liability increased by $1.3 million and stockholder's equity increased by $2.3 million. |
BALANCE SHEETS (unaudited)
June 30, | December 31, | |||||||
2009 | 2008 (1) | |||||||
(In thousands, except share data) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,960 | $ | 1,213 | ||||
Restricted cash | 558 | 502 | ||||||
Short-term investments | 1,374 | 2,502 | ||||||
Receivables, net | 181,652 | 259,082 | ||||||
Oil and gas well equipment and supplies | 191,911 | 186,062 | ||||||
Deferred income taxes | 9,182 | 2,435 | ||||||
Derivative instruments | 4,840 | — | ||||||
Other current assets | 54,559 | 63,148 | ||||||
Total current assets | 447,036 | 514,944 | ||||||
Oil and gas properties at cost, using the full cost method of accounting: | ||||||||
Proved properties | 7,333,298 | 7,052,464 | ||||||
Unproved properties and properties under development, not being amortized | 407,630 | 465,638 | ||||||
7,740,928 | 7,518,102 | |||||||
Less – accumulated depreciation, depletion and amortization | (5,642,874 | ) | (4,709,597 | ) | ||||
Net oil and gas properties | 2,098,054 | 2,808,505 | ||||||
Fixed assets, net | 119,857 | 119,616 | ||||||
Goodwill | 691,432 | 691,432 | ||||||
Other assets, net | 46,425 | 30,436 | ||||||
$ | 3,402,804 | $ | 4,164,933 | |||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 23,973 | $ | 101,157 | ||||
Accrued liabilities | 162,287 | 263,994 | ||||||
Derivative instruments | 528 | — | ||||||
Revenue payable | 85,930 | 104,438 | ||||||
Total current liabilities | 272,718 | 469,589 | ||||||
Long-term debt | 706,712 | 587,630 | ||||||
Deferred income taxes | 273,803 | 500,945 | ||||||
Other liabilities | 257,070 | 255,122 | ||||||
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, 83,401,551 and 84,144,024 shares issued, respectively | 834 | 841 | ||||||
Treasury stock, at cost, zero and 885,392 shares held, respectively | — | (33,344 | ) | |||||
Paid-in capital | 1,847,209 | 1,874,834 | ||||||
Retained earnings | 44,898 | 510,271 | ||||||
Accumulated other comprehensive loss | (440 | ) | (955 | ) | ||||
1,892,501 | 2,351,647 | |||||||
$ | 3,402,804 | $ | 4,164,933 |
(1) | Effective January 1, 2009, we adopted the Financial Accounting Standards Board's (FASB) Staff Position (No. APB 14-1), Accounting for Convertible Debt Instrument That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement). The requirements are to be applied retrospectively to previously issued convertible instruments. These changes resulted in additional non-cash interest expense of approximately $0.46 million and $0.93 million applied retrospectively to the second quarter of 2008 and first half of 2008, respectively. In addition, long-term debt at December 31, 2008 was decreased by $3.6 million, deferred income tax liability increased by $1.3 million and stockholder's equity increased by $2.3 million. |