NEWS
Cimarex Energy Co. 1700 Lincoln Street, Suite 1800 Denver, CO 80203 Phone: (303) 295-3995 | ![]() |
Cimarex Reports Third-Quarter 2009 Financial Results
DENVER, November 3, 2009 - Cimarex Energy Co. (NYSE: XEC) today reported third-quarter 2009 net income of $38.7 million, or $0.46 per diluted share. Reducing third-quarter earnings are mark-to-market losses on derivatives of $17.5 million ($10.3 million after tax) and impairment of well equipment and supplies of $5.4 million ($3.2 million after tax).
A year ago, Cimarex had a third-quarter loss of $232.4 million, or $2.85 per share. Third-quarter 2008 results included a $657.1 million ($417.4 million after-tax) full-cost ceiling test write-down.
Revenues from oil and gas sales in the third quarter of 2009 were $238.3 million, a 57% decrease compared to $552.4 million in the same period of 2008. Third-quarter 2009 cash flow from operations totaled $181.7 million versus $413.8 million in the same period of 2008(1).
The decrease in third-quarter 2009 revenues and cash flow is primarily a result of lower oil and gas prices. Third-quarter 2009 gas prices decreased 61% to $3.80 per thousand cubic feet (Mcf) and oil fell 45% to $63.49 per barrel from the same period of 2008.
Third-quarter 2009 oil and gas production averaged 441.5 million cubic feet equivalent per day (MMcfe/d), comprised of 306.8 million cubic feet of gas and 22,439 barrels of oil. Reflecting our planned reduction in drilling, daily production decreased 9% from a year-earlier. Cimarex’s third-quarter 2009 operated rig count averaged nine versus 43 in the comparable period of 2008.
For the first nine months of 2009, Cimarex had a net loss of $416.6 million, or $5.10 per share, as compared to net income of $146.1 million, or $1.71 per share, for the comparable period of 2008. The net loss for 2009 includes a first-quarter full-cost ceiling test write-down of $791.1 million ($501.8 million after-tax).
Capital
Third-quarter 2009 exploration and development (E&D) capital totaled $126.2 million, down from $418.9 million in the third quarter of 2008. In the third quarter of 2009, Cimarex drilled 29 gross (21 net) wells, completing 93% as producers.
For the first nine months of 2009, E&D capital expenditures were $366.9 million versus $1,085.8 million during the comparable period of 2008. During 2009 we have drilled 76% fewer wells as compared to 2008. We expect 2009 capital expenditures will range from $500-$550 million.
Other
Cimarex has oil and natural gas hedge contracts for October 2009 through December 2010. Calendar 2010 hedges cover on average 11,000 barrels of oil per day and 160,000 MMBtu of gas per day, representing slightly less than half of expected production. The following tables summarize the current commodity hedge position:
Natural Gas Contracts
Weighted Average Price | |||||||||||||||||||
Period | Type | Volume (2) | Index(3) | Floor | Ceiling | Swap | |||||||||||||
Oct 09 - Dec 09 | Collar | 143,370 | PEPL | $ | 3.00 | $ | 5.00 | $ | - | ||||||||||
Jan 10 - Dec 10 | Collar | 100,000 | PEPL | $ | 5.00 | $ | 6.62 | $ | - | ||||||||||
Jan 10 - Dec 10 | Swap | 40,000 | PEPL | $ | - | $ | - | $ | 5.18 | ||||||||||
Jan 10 - Dec 10 | Collar | 20,000 | HSC | $ | 5.00 | $ | 6.85 | $ | - | ||||||||||
160,000 |
Oil Contracts
Weighted Average Price | |||||||||||||||||||
Period | Type | Volume (2) | Index(3) | Floor | Ceiling | Put | |||||||||||||
Jan 10 – Dec 10 | Collar | 10,000 | WTI | $ | 60.03 | $ | 92.07 | $ | - | ||||||||||
Jan 10 – Dec 10 | Floor/Put | 1,000 | WTI | $ | - | $ | - | $ | 60.00 | ||||||||||
11,000 |
Cimarex accounts for these commodity contracts using the mark-to-market accounting method.
2
Total long-term debt at the end of the third quarter was $523.8 million. As of September 30, 2009, our debt to total capitalization ratio was 21% (4).
As previously announced, Cimarex’s bank group reaffirmed the Company’s $1.0 billion borrowing base related to its credit facility maturing in April 2012. Bank group commitments of $800 million also remain unchanged. As of September 30, 2009, Cimarex had bank borrowings outstanding of $156 million, which is $183 million less than the second-quarter balance of $339 million. The reduction in borrowings was funded from non-core property sales, tax refunds, lower capital spending relative to cash flow and a net positive working capital change.
Immediately after quarter-end, Cimarex completed the sale of its interest in a Texas secondary recovery oil field for $81 million, which further reduced bank borrowings to $115 million. Year-to-date asset sales total approximately $117 million, with associated proved reserves of 28 billion cubic feet equivalent and 8 MMcfe/d of production.
Outlook
Based on current drilling and completion activity and including the impact of property sales, fourth-quarter 2009 production is projected to range between 440-455 MMcfe/d, resulting in full-year 2009 volumes of 455-460 Mcfe/d. Fourth-quarter projections have been reduced by approximately 8 MMcfe/d for properties sold, including the $81 million sale of the Texas secondary recovery oil field closed the first week of October.
Expenses for the fourth quarter of 2009 are expected to fall within the following ranges:
Expenses ($/Mcfe): | ||
Production expense | $1.10 - $1.20 | |
Transportation expense | 0.19 - 0.24 | |
DD&A and ARO accretion | 1.40 - 1.70 | |
General and administrative expense | 0.24 - 0.30 | |
Taxes other than income (% of oil and gas revenue) | 7.5% - 8.5% |
3
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 (800) 921-0061 and reference call ID # 36165491 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 # 36165491. 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) | Gas volume in MMBtu per day and oil volume in barrels per day. |
(3) | PEPL refers to Panhandle Eastern Pipe Line, Tex/Ok Mid-Continent index and HSC stands for Houston Ship Channel Gulf Coast index both as quoted in Platt’s Inside FERC. WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange. |
(4) | Reconciliation of debt to total capitalization, which is a non-GAAP measure, is: long-term debt of $523.8 million divided by long-term debt of $523.8 million plus stockholders’ equity of $1,933.2 million. |
4
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
5
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net cash provided by operating activities | $ | 271,300 | $ | 443,157 | $ | 465,646 | $ | 1,140,709 | ||||||||
Change in operating assets and liabilities | (89,620 | ) | (29,315 | ) | 6,788 | 43,705 | ||||||||||
Cash flow from operations | $ | 181,680 | $ | 413,842 | $ | 472,434 | $ | 1,184,414 |
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 Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Total gas production - Mcf | 28,229,461 | 32,135,957 | 87,604,619 | 95,217,617 | ||||||||||||
Gas volume - Mcf per day | 306,842 | 349,304 | 320,896 | 347,510 | ||||||||||||
Gas price - per Mcf | $ | 3.80 | $ | 9.76 | $ | 3.70 | $ | 9.58 | ||||||||
Total oil production - barrels | 2,064,400 | 2,079,835 | 6,388,336 | 6,195,523 | ||||||||||||
Oil volume - barrels per day | 22,439 | 22,607 | 23,400 | 22,611 | ||||||||||||
Oil price - per barrel | $ | 63.49 | $ | 114.87 | $ | 50.80 | $ | 110.26 |
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Acquisitions: | ||||||||||||||||
Proved | $ | 350 | $ | 120 | $ | 474 | $ | 1,489 | ||||||||
Unproved* | (10,315 | ) | — | (10,315 | ) | — | ||||||||||
(9,965 | ) | 120 | (9,841 | ) | 1,489 | |||||||||||
Exploration and development: | ||||||||||||||||
Land and Seismic | 7,036 | 52,485 | 34,072 | 109,611 | ||||||||||||
Exploration and development | 119,144 | 366,456 | 332,844 | 976,183 | ||||||||||||
126,180 | 418,941 | 366,916 | 1,085,794 | |||||||||||||
Sale proceeds: | ||||||||||||||||
Proved | (9,877 | ) | — | (25,271 | ) | — | ||||||||||
Unproved | — | — | (3,034 | ) | — | |||||||||||
(9,877 | ) | — | (28,305 | ) | — | |||||||||||
$ | 106,338 | $ | 419,061 | $ | 328,770 | $ | 1,087,283 |
* The negative balance reflects purchase price adjustments related to an acreage acquisition in the fourth quarter of 2008.
6
For the Three Months Ended | For the Nine Months Ended | |||||||||||||||
September 30, | September 30, | |||||||||||||||
2009 | 2008 (1) | 2009 | 2008 (1) | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues: | ||||||||||||||||
Gas sales | $ | 107,275 | $ | 313,523 | $ | 324,438 | $ | 912,443 | ||||||||
Oil sales | 131,073 | 238,918 | 324,507 | 683,109 | ||||||||||||
Gas gathering, processing and other | 10,732 | 24,163 | 31,165 | 73,734 | ||||||||||||
Gas marketing, net | 54 | 654 | 888 | 2,225 | ||||||||||||
249,134 | 577,258 | 680,998 | 1,671,511 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Impairment of oil and gas properties | — | 657,146 | 791,137 | 657,146 | ||||||||||||
Depreciation, depletion, amortization and accretion | 63,264 | 149,410 | 214,456 | 411,623 | ||||||||||||
Production | 42,682 | 55,362 | 139,127 | 156,506 | ||||||||||||
Transportation | 8,760 | 10,621 | 25,233 | 29,551 | ||||||||||||
Gas gathering and processing | 4,830 | 12,591 | 14,347 | 35,787 | ||||||||||||
Taxes other than income | 19,728 | 39,097 | 50,525 | 109,453 | ||||||||||||
General and administrative | 12,522 | 12,377 | 29,803 | 37,837 | ||||||||||||
Stock compensation, net | 2,477 | 2,791 | 6,831 | 7,432 | ||||||||||||
Loss on derivative instruments, net | 17,357 | — | 17,613 | — | ||||||||||||
Other operating, net | 2,911 | 11,871 | 19,094 | 12,992 | ||||||||||||
174,531 | 951,266 | 1,308,166 | 1,458,327 | |||||||||||||
Operating income (loss) | 74,603 | (374,008 | ) | (627,168 | ) | 213,184 | ||||||||||
Other (income) and expense: | ||||||||||||||||
Interest expense | 8,862 | 7,789 | 26,554 | 23,943 | ||||||||||||
Amortization of deferred financing costs | 1,761 | 277 | 3,590 | 842 | ||||||||||||
Capitalized interest | (5,295 | ) | (5,671 | ) | (16,230 | ) | (14,930 | ) | ||||||||
Other, net | 3,737 | (8,086 | ) | 11,627 | (16,610 | ) | ||||||||||
Income (loss) before income tax | 65,538 | (368,317 | ) | (652,709 | ) | 219,939 | ||||||||||
Income tax expense (benefit) | 26,833 | (135,894 | ) | (236,121 | ) | 73,811 | ||||||||||
Net income (loss) | $ | 38,705 | $ | (232,423 | ) | $ | (416,588 | ) | $ | 146,128 | ||||||
Earnings (loss) per share to common stockholders (2): | ||||||||||||||||
Basic | $ | 0.46 | $ | (2.85 | ) | $ | (5.10 | ) | $ | 1.74 | ||||||
Diluted | $ | 0.46 | $ | (2.85 | ) | $ | (5.10 | ) | $ | 1.71 | ||||||
Dividends per share | $ | 0.06 | $ | 0.06 | $ | 0.18 | $ | 0.18 | ||||||||
Shares attributable to common stockholders: | ||||||||||||||||
Common shares outstanding | 81,792 | 81,576 | 81,792 | 81,576 | ||||||||||||
Diluted common shares outstanding | 82,177 | 81,576 | 81,792 | 83,275 |
(1) | Effective January 1, 2009, we adopted a new rule promulgated by the Financial Accounting Standards Board (FASB) pertaining to the accounting treatment for convertible debt instruments that may be settled in cash upon conversion. 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 $1.4 million applied retrospectively to the third quarter of 2008 and first nine months 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 a new rule promulgated by the FASB which defines when certain share based payment awards are to be treated as participating securities in the calculation of earnings per share. The rule requires qualifying awards to be included in computing earnings per share using the two-class earnings allocation method and is to be applied retrospectively to prior periods. Under the two-class earnings allocation method, earnings available to common stockholders do not include earnings attributable to unvested restricted stock and stock units, which are considered participating securities. Shares attributed to common stockholders do not include outstanding restricted stock. Neither potential common shares nor participating securities are included in the diluted computations when a loss from continuing operations exists. For complete details of the earnings per share calculation, please refer to our quarterly financial statements, filed with the SEC on Form 10-Q and posted on our website. |
7
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2009 | 2008 (1) | 2009 | 2008 (1) | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 38,705 | $ | (232,423 | ) | $ | (416,588 | ) | $ | 146,128 | ||||||
Adjustment to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||
Impairments | 2,910 | 657,146 | 804,815 | 657,146 | ||||||||||||
Depreciation, depletion, amortization and accretion | 63,264 | 149,410 | 214,456 | 411,623 | ||||||||||||
Deferred income taxes | 13,528 | (162,962 | ) | (220,592 | ) | (38,840 | ) | |||||||||
Stock compensation, net | 2,477 | 2,791 | 6,831 | 7,432 | ||||||||||||
Derivative instruments, net | 17,532 | — | 21,157 | — | ||||||||||||
Changes in non-current assets and liabilities | 42,794 | (333 | ) | 48,673 | (94 | ) | ||||||||||
Amortization of deferred financing costs and other, net | 470 | 213 | 13,682 | 1,019 | ||||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
(Increase) decrease in receivables, net | 7,738 | 82,375 | 84,044 | (20,762 | ) | |||||||||||
(Increase) decrease in other current assets | 43,404 | (13,622 | ) | 17,404 | (59,669 | ) | ||||||||||
Increase (decrease) in accounts payable and accrued liabilities | 38,478 | (39,438 | ) | (108,236 | ) | 36,726 | ||||||||||
Net cash provided by operating activities | 271,300 | 443,157 | 465,646 | 1,140,709 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Oil and gas expenditures | (97,366 | ) | (385,651 | ) | (390,108 | ) | (1,026,719 | ) | ||||||||
Sales of oil and gas and other assets | 19,993 | 79 | 38,556 | 434 | ||||||||||||
Sales of short-term investments | 2,098 | 2,227 | 3,328 | 9,288 | ||||||||||||
Other expenditures | (10,404 | ) | (22,167 | ) | (21,131 | ) | (43,253 | ) | ||||||||
Net cash used by investing activities | (85,679 | ) | (405,512 | ) | (369,355 | ) | (1,060,250 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Net increase (decrease) in bank debt | (183,000 | ) | — | (64,000 | ) | — | ||||||||||
Financing costs incurred | (34 | ) | — | (17,995 | ) | (50 | ) | |||||||||
Dividends paid | (5,047 | ) | (5,033 | ) | (15,123 | ) | (15,007 | ) | ||||||||
Issuance of common stock and other | 2,462 | (30 | ) | 2,576 | 12,931 | |||||||||||
Net cash used in financing activities | (185,619 | ) | (5,063 | ) | (94,542 | ) | (2,126 | ) | ||||||||
Net change in cash and cash equivalents | 2 | 32,582 | 1,749 | 78,333 | ||||||||||||
Cash and cash equivalents at beginning of period | 2,960 | 168,801 | 1,213 | 123,050 | ||||||||||||
Cash and cash equivalents at end of period | $ | 2,962 | $ | 201,383 | $ | 2,962 | $ | 201,383 |
(1) | Effective January 1, 2009, we adopted a new rule promulgated by the Financial Accounting Standards Board pertaining to the accounting treatment for convertible debt instruments that may be settled in cash upon conversion. 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 $1.4 million applied retrospectively to the third quarter of 2008 and first nine months 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. |
8
BALANCE SHEETS (unaudited)
September 30, | December 31, | |||||||
2009 | 2008 (1) | |||||||
(In thousands, except share data) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 2,962 | $ | 1,213 | ||||
Restricted cash | 593 | 502 | ||||||
Short-term investments | — | 2,502 | ||||||
Receivables, net | 173,914 | 259,082 | ||||||
Oil and gas well equipment and supplies | 166,021 | 186,062 | ||||||
Deferred income taxes | 8,566 | 2,435 | ||||||
Derivative instruments | 3,150 | — | ||||||
Other current assets | 26,303 | 63,148 | ||||||
Total current assets | 381,509 | 514,944 | ||||||
Oil and gas properties at cost, using the full cost method of accounting: | ||||||||
Proved properties | 7,476,167 | 7,052,464 | ||||||
Unproved properties and properties under development, not being amortized | 385,321 | 465,638 | ||||||
7,861,488 | 7,518,102 | |||||||
Less – accumulated depreciation, depletion and amortization | (5,696,671 | ) | (4,709,597 | ) | ||||
Net oil and gas properties | 2,164,817 | 2,808,505 | ||||||
Fixed assets, net | 122,984 | 119,616 | ||||||
Goodwill | 691,432 | 691,432 | ||||||
Other assets, net | 35,420 | 30,436 | ||||||
$ | 3,396,162 | $ | 4,164,933 | |||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 19,646 | $ | 101,157 | ||||
Accrued liabilities | 202,544 | 263,994 | ||||||
Derivative instruments | 12,645 | — | ||||||
Revenue payable | 90,027 | 104,438 | ||||||
Total current liabilities | 324,862 | 469,589 | ||||||
Long-term debt | 523,753 | 587,630 | ||||||
Deferred income taxes | 327,653 | 500,945 | ||||||
Other liabilities | 286,711 | 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, 83,511,991 and 84,144,024 shares issued, respectively | 835 | 841 | ||||||
Treasury stock, at cost, zero and 885,392 shares held, respectively | — | (33,344 | ) | |||||
Paid-in capital | 1,853,876 | 1,874,834 | ||||||
Retained earnings | 78,546 | 510,271 | ||||||
Accumulated other comprehensive loss | (74 | ) | (955 | ) | ||||
1,933,183 | 2,351,647 | |||||||
$ | 3,396,162 | $ | 4,164,933 |
(1) | Effective January 1, 2009, we adopted a new rule promulgated by the Financial Accounting Standards Board pertaining to the accounting treatment for convertible debt instruments that may be settled in cash upon conversion. 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 $1.4 million applied retrospectively to the third quarter of 2008 and first nine months 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. |
9