N E W S | |
Cimarex Energy Co. | |
1700 Lincoln Street, Suite 1800 | |
Denver, CO 80203 | |
Phone: (303) 295-3995 |
Cimarex Reports Second-Quarter 2010 Net Income of $124.6 Million
DENVER, August 4, 2010 - Cimarex Energy Co. (NYSE: XEC) today reported second-quarter 2010 net income of $124.6 million, or $1.46 per diluted share. This compares to second-quarter 2009 earnings of $38.8 million, or $0.46 per diluted share.
Revenues from gas, oil and natural gas liquids (NGLs) sales in the second quarter of 2010 were $364.9 million, a 71% increase compared to $213.4 million in the same period of 2009. Second-quarter 2010 cash flow from operations totaled $259.9 million versus $153.1 million a year ago(1).
The increase in second-quarter 2010 revenues is a result of higher commodity prices and increasing production. Second-quarter 2010 gas prices increased 29% to $4.48 per thousand cubic feet (Mcf) and oil improved 36% to $75.26 per barrel as compared to the same period of 2009.
Second-quarter 2010 production volumes averaged 594.4 million cubic feet equivalent per day (MMcfe/d), comprised of 371.4 million cubic feet of gas, 10,792 barrels of NGLs and 26,381 barrels of oil.
Second-quarter 2010 production grew 31% from the second-quarter 2009 average of 453.9 MMcfe/d. Production increases reflect solid drilling results in southeast Texas and western Oklahoma.
For the six month period ended June 30, 2010, net income totaled $329.0 million, or $3.84 per diluted share, as compared to a loss of $455.3 million, or $5.58 per share, for the first six months of 2009. The 2009 period was impacted by a $502 million ($6.15 per share) after-tax full-cost ceiling test write-down.
First-half 2010 cash flow from operations totaled $573.1 million versus $290.8 million in the same period of 2009(1).
Outlook
Third-quarter 2010 production is projected to be in the range of 585-615 MMcfe/d. Full-year 2010 production is now projected to be in the range of 585-605 MMcfe/d, a 26-31% increase over 2009. The previous production guidance was 570-595 MMcfe/d. Increased activity in Permian Basin horizontal oil projects are playing a key role in the higher guidance.
Expenses for 2010 are expected to fall within the following ranges:
Expenses ($/Mcfe): | ||||
Production expense | $ | 0.80 - $1.00 | ||
Transportation expense | 0.19 - 0.24 | |||
DD&A and ARO accretion | 1.30 - 1.60 | |||
General and administrative expense | 0.22 - 0.28 | |||
Taxes other than income (% of oil and gas revenue) | 7.5% - 8.5 | % |
Exploration and Development (E&D) Capital
Second-quarter 2010 E&D capital investment totaled $237.5 million, as compared to $98.7 million in the second quarter of 2009. First-half 2010 E&D capital totaled $430.0 million versus $240.7 in the comparable period of 2009. Cimarex drilled and completed 89 gross (55.5 net) wells in the first half of 2010, of which 84 gross (52.2 net) were successful. At quarter-end 33 gross (16.5 net) wells were in the process of being completed or were awaiting completion.
Full-year 2010 E&D capital investment is now projected to be in the range of $900 million to $1 billion, which we expect to be less than 2010 operating cash flow. This is an increase from the previous E&D capital investment estimate of $700-$900 million. The additional investment is a result of greater drilling and leasing activity in Permian Basin oil plays.
First-half 2010 land and seismic investment totaled $63.2 million, of which $44 million or nearly 70% was in the Permian Basin. The operated rig count in the Permian Basin has also increased from five at the end of the first quarter to 12 currently. With the increased rig count we expect to drill approximately 100 net wells in 2010, a 33% increase over the previous estimate of 75 net wells.
2
Other
Cimarex has oil and natural gas contracts for July 2010 through December 2011. Calendar 2010 hedges are unchanged. Mid-Continent gas swaps covering 20,000 MMBtu per day for calendar 2011 were entered into since the end of the first quarter. The following tables summarize the current commodity hedge position:
Natural Gas Contracts
Weighted Average Price | |||||||||||||||||||
Period | Type | Volume (2) | Index(3) | Floor | Ceiling | Swap | |||||||||||||
Jul 10 - Dec 10 | Collar | 100,000 | PEPL | $ | 5.00 | $ | 6.62 | $ | - | ||||||||||
Jul 10 - Dec 10 | Swap | 40,000 | PEPL | $ | - | $ | - | $ | 5.18 | ||||||||||
Jul 10 - Dec 10 | Collar | 20,000 | HSC | $ | 5.00 | $ | 6.85 | $ | - | ||||||||||
160,000 | |||||||||||||||||||
Jan 11 – Dec 11 | Swap | 20,000 | PEPL | $ | - | $ | - | $ | 5.05 |
Oil Contracts
Weighted Average Price | |||||||||||||||||||
Period | Type | Volume (2) | Index(3) | Floor | Ceiling | Put | |||||||||||||
Jul 10 – Dec 10 | Collar | 10,000 | WTI | $ | 60.03 | $ | 92.07 | $ | - | ||||||||||
Jul 10 – Dec 10 | Put/Floor | 1,000 | WTI | $ | - | $ | - | $ | 60.00 | ||||||||||
11,000 | |||||||||||||||||||
Jan 11 – Dec 11 | Collar | 8,000 | WTI | $ | 65.00 | $ | 105.81 | $ | - |
Cimarex accounts for these commodity contracts using the mark-to-market (through income) accounting method. Second-quarter 2010 net cash settlements for natural gas hedge contracts were $17 million. There were no settlements for oil.
Long-term debt at June 30, 2010 was $350 million. Debt to total capitalization ratio at quarter-end was 13% (4).
Subsequent to quarter end, all remaining holders of our floating rate convertible senior notes elected to convert. In July 2010, the holders received $20.5 million (principal of $19.5 million and $1.0 million for fractional shares) and 408,450 shares. As of June 30, 2010, the notes are classified as a current liability and the stock is included in fully diluted shares.
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 (888) 558-6372 and reference call ID # 89216681 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 # 89216681. 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, 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
(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 $350 million divided by long-term debt of $350 million plus stockholders’ equity of $2,368 million. |
4
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Net cash provided by operating activities | $ | 273,153 | $ | 111,790 | $ | 572,260 | $ | 194,346 | ||||||||
Change in operating assets and liabilities | (13,259 | ) | 41,318 | 841 | 96,408 | |||||||||||
Cash flow from operations | $ | 259,894 | $ | 153,108 | $ | 573,101 | $ | 290,754 |
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, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
Total gas production - Mcf | 33,792,812 | 28,909,821 | 68,967,732 | 59,375,158 | ||||||||||||
Gas volume - Mcf per day | 371,350 | 317,690 | 381,037 | 328,040 | ||||||||||||
Gas price - per Mcf | $ | 4.48 | $ | 3.48 | $ | 5.47 | $ | 3.66 | ||||||||
Total oil production - barrels | 2,400,661 | 2,005,675 | 4,917,701 | 4,218,034 | ||||||||||||
Oil volume - barrels per day | 26,381 | 22,040 | 27,170 | 23,304 | ||||||||||||
Oil price - per barrel | $ | 75.26 | $ | 55.27 | $ | 75.69 | $ | 45.09 | ||||||||
Total NGL production - barrels | 982,040 | 60,544 | 1,370,242 | 105,902 | ||||||||||||
NGL volume - barrels per day * | 10,792 | 665 | 7,570 | 585 | ||||||||||||
NGL price - per barrel | $ | 33.45 | $ | 32.69 | $ | 35.07 | $ | 30.66 |
* | NGL production volumes are recorded based on where title transfer occurs. The increase in barrels per day of NGL production compared to the same periods of 2009 relates primarily to our western Oklahoma, Cana-Woodford shale play and the Yegua/Cook Mountain southeast Texas Gulf Coast production. |
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(in thousands) | (in thousands) | |||||||||||||||
Acquisitions: | ||||||||||||||||
Proved | $ | 6,630 | $ | 49 | $ | 13,786 | $ | 124 | ||||||||
Unproved | 4,022 | — | 20,066 | — | ||||||||||||
10,652 | 49 | 33,852 | 124 | |||||||||||||
Exploration and development: | ||||||||||||||||
Land and Seismic | 38,258 | 10,757 | 63,161 | 27,036 | ||||||||||||
Exploration and development | 199,200 | 87,948 | 366,886 | 213,700 | ||||||||||||
237,458 | 98,705 | 430,047 | 240,736 | |||||||||||||
Sale proceeds: | ||||||||||||||||
Proved | (24,861 | ) | (14,664 | ) | (24,861 | ) | (15,394 | ) | ||||||||
Unproved | (3,917 | ) | — | (3,917 | ) | (3,034 | ) | |||||||||
(28,778 | ) | (14,664 | ) | (28,778 | ) | (18,428 | ) | |||||||||
$ | 219,332 | $ | 84,090 | $ | 435,121 | $ | 222,432 |
5
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands, except per share data) | ||||||||||||||||
Revenues: | ||||||||||||||||
Gas sales | $ | 151,375 | $ | 100,539 | $ | 377,012 | $ | 217,163 | ||||||||
Oil sales | 180,664 | 110,850 | 372,224 | 190,187 | ||||||||||||
NGL sales | 32,851 | 1,979 | 48,060 | 3,247 | ||||||||||||
Gas gathering, processing and other | 13,602 | 9,363 | 29,452 | 20,433 | ||||||||||||
Gas marketing, net | 9 | (46 | ) | 323 | 834 | |||||||||||
378,501 | 222,685 | 827,071 | 431,864 | |||||||||||||
Costs and expenses: | ||||||||||||||||
Impairment of oil and gas properties | — | — | — | 791,137 | ||||||||||||
Depreciation, depletion, amortization and accretion | 74,787 | 58,981 | 147,141 | 151,192 | ||||||||||||
Production | 45,356 | 46,031 | 87,339 | 96,445 | ||||||||||||
Transportation | 10,825 | 7,764 | 21,992 | 16,473 | ||||||||||||
Gas gathering and processing | 6,100 | 4,411 | 12,605 | 9,517 | ||||||||||||
Taxes other than income | 28,410 | 15,252 | 60,768 | 30,797 | ||||||||||||
General and administrative | 11,817 | 9,519 | 24,862 | 17,281 | ||||||||||||
Stock compensation, net | 2,993 | 2,097 | 5,771 | 4,354 | ||||||||||||
(Gain) Loss on derivative instruments, net | (3,289 | ) | 358 | (55,886 | ) | 256 | ||||||||||
Other operating, net | 1,876 | 6,091 | 30 | 16,183 | ||||||||||||
178,875 | 150,504 | 304,622 | 1,133,635 | |||||||||||||
Operating income (loss) | 199,626 | 72,181 | 522,449 | (701,771 | ) | |||||||||||
Other (income) and expense: | ||||||||||||||||
Interest expense | 7,387 | 9,737 | 15,133 | 17,693 | ||||||||||||
Amortization of deferred financing costs | 1,714 | 1,517 | 3,430 | 1,828 | ||||||||||||
Capitalized interest | (7,285 | ) | (5,422 | ) | (14,709 | ) | (10,935 | ) | ||||||||
Other, net | 1,851 | 5,535 | (79 | ) | 7,890 | |||||||||||
Income (loss) before income tax | 195,959 | 60,814 | 518,674 | (718,247 | ) | |||||||||||
Income tax expense (benefit) | 71,339 | 22,007 | 189,693 | (262,954 | ) | |||||||||||
Net income (loss) | $ | 124,620 | $ | 38,807 | $ | 328,981 | $ | (455,293 | ) | |||||||
Earnings (loss) per share to common stockholders: | ||||||||||||||||
Basic | $ | 1.47 | $ | 0.46 | $ | 3.88 | $ | (5.58 | ) | |||||||
Diluted | $ | 1.46 | $ | 0.46 | $ | 3.84 | $ | (5.58 | ) | |||||||
Dividends per share | $ | 0.08 | $ | 0.06 | $ | 0.16 | $ | 0.12 | ||||||||
Shares attributable to common stockholders: | ||||||||||||||||
Unrestricted Common shares outstanding | 82,352 | 81,701 | 82,352 | 81,701 | ||||||||||||
Diluted common shares | 83,251 | 82,047 | 83,242 | 81,701 | ||||||||||||
Shares attributable to common stockholders and participating securities: | ||||||||||||||||
Basic shares outstanding | 84,742 | 84,053 | 84,742 | 84,053 | ||||||||||||
Fully diluted shares | 85,641 | 84,399 | 85,632 | 84,053 |
6
CONDENSED CASH FLOW STATEMENTS (unaudited)
For the Three Months Ended | For the Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2010 | 2009 | 2010 | 2009 | |||||||||||||
(In thousands) | (In thousands) | |||||||||||||||
Cash flows from operating activities: | ||||||||||||||||
Net income (loss) | $ | 124,620 | $ | 38,807 | $ | 328,981 | $ | (455,293 | ) | |||||||
Adjustment to reconcile net income (loss) to net cash | ||||||||||||||||
provided by operating activities: | ||||||||||||||||
Impairments and other valuation losses | — | 6,343 | — | 801,905 | ||||||||||||
Depreciation, depletion, amortization and accretion | 74,787 | 58,981 | 147,141 | 151,192 | ||||||||||||
Deferred income taxes | 40,313 | 35,632 | 125,303 | (234,120 | ) | |||||||||||
Stock compensation, net | 2,993 | 2,097 | 5,771 | 4,354 | ||||||||||||
Derivative instruments, net | 13,281 | 3,727 | (38,775 | ) | 3,625 | |||||||||||
Changes in non-current assets and liabilities | 2,513 | 1,453 | 5,614 | 5,879 | ||||||||||||
Amortization of deferred financing costs | ||||||||||||||||
and other, net | 1,387 | 6,068 | (934 | ) | 13,212 | |||||||||||
Changes in operating assets and liabilities: | ||||||||||||||||
(Increase) decrease in receivables, net | 49,544 | (10,925 | ) | 10,049 | 76,306 | |||||||||||
(Increase) decrease in other current assets | (1,908 | ) | (2,256 | ) | 16,587 | (26,000 | ) | |||||||||
Decrease in accounts payable and | ||||||||||||||||
accrued liabilities | (34,377 | ) | (28,137 | ) | (27,477 | ) | (146,714 | ) | ||||||||
Net cash provided by operating activities | 273,153 | 111,790 | 572,260 | 194,346 | ||||||||||||
Cash flows from investing activities: | ||||||||||||||||
Oil and gas expenditures | (223,259 | ) | (95,193 | ) | (426,941 | ) | (292,742 | ) | ||||||||
Sales of oil and gas and other assets | 28,850 | 14,739 | 28,905 | 18,563 | ||||||||||||
Sales of short-term investments | — | 307 | — | 1,230 | ||||||||||||
Other expenditures | (6,986 | ) | (2,760 | ) | (14,808 | ) | (10,727 | ) | ||||||||
Net cash used by investing activities | (201,395 | ) | (82,907 | ) | (412,844 | ) | (283,676 | ) | ||||||||
Cash flows from financing activities: | ||||||||||||||||
Net increase (decrease) in bank debt | — | (6,000 | ) | (25,000 | ) | 119,000 | ||||||||||
Financing costs incurred | (100 | ) | (17,959 | ) | (100 | ) | (17,961 | ) | ||||||||
Dividends paid | (6,766 | ) | (5,036 | ) | (11,835 | ) | (10,076 | ) | ||||||||
Issuance of common stock and other | 14,623 | 114 | 17,032 | 114 | ||||||||||||
Net cash provided by (used in) | ||||||||||||||||
financing activities | 7,757 | (28,881 | ) | (19,903 | ) | 91,077 | ||||||||||
Net change in cash and cash equivalents | 79,515 | 2 | 139,513 | 1,747 | ||||||||||||
Cash and cash equivalents at beginning of period | 62,542 | 2,958 | 2,544 | 1,213 | ||||||||||||
Cash and cash equivalents at end of period | $ | 142,057 | $ | 2,960 | $ | 142,057 | $ | 2,960 |
7
BALANCE SHEETS (unaudited)
June 30, | December 31, | |||||||
2010 | 2009 | |||||||
(In thousands, except share data) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 142,057 | $ | 2,544 | ||||
Restricted cash | 659 | 593 | ||||||
Receivables, net | 217,822 | 227,896 | ||||||
Oil and gas well equipment and supplies | 111,143 | 145,153 | ||||||
Deferred income taxes | — | 15,837 | ||||||
Derivative instruments | 23,570 | 1,238 | ||||||
Other current assets | 32,308 | 13,997 | ||||||
Total current assets | 527,559 | 407,258 | ||||||
Oil and gas properties at cost, using the full cost method of accounting: | ||||||||
Proved properties | 7,909,086 | 7,549,861 | ||||||
Unproved properties and properties under development, | ||||||||
not being amortized | 475,899 | 399,724 | ||||||
8,384,985 | 7,949,585 | |||||||
Less – accumulated depreciation, depletion and amortization | (5,896,323 | ) | (5,764,669 | ) | ||||
Net oil and gas properties | 2,488,662 | 2,184,916 | ||||||
Fixed assets, net | 130,722 | 127,237 | ||||||
Goodwill | 691,432 | 691,432 | ||||||
Other assets, net | 32,258 | 33,694 | ||||||
$ | 3,870,633 | $ | 3,444,537 | |||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Current maturities of long-term debt | $ | 17,871 | $ | — | ||||
Accounts payable | 38,437 | 30,214 | ||||||
Accrued liabilities | 251,630 | 235,815 | ||||||
Derivative instruments | 109 | 13,902 | ||||||
Revenue payable | 113,430 | 108,832 | ||||||
Total current liabilities | 421,477 | 388,763 | ||||||
Long-term debt | 350,000 | 392,793 | ||||||
Deferred income taxes | 455,987 | 348,897 | ||||||
Other liabilities | 275,517 | 275,978 | ||||||
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, | ||||||||
84,094,582 and 83,541,995 shares issued, respectively | 841 | 835 | ||||||
Paid-in capital | 1,873,414 | 1,859,255 | ||||||
Retained earnings | 493,565 | 178,035 | ||||||
Accumulated other comprehensive loss | (168 | ) | (19 | ) | ||||
2,367,652 | 2,038,106 | |||||||
$ | 3,870,633 | $ | 3,444,537 |
8