DENVER, May 3, 2012 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported first-quarter 2012 net income of $106.1 million, or $1.23 per diluted share. This compares to first-quarter 2011 earnings of $118.2 million, or $1.37 per diluted share.
First-quarter 2012 net income includes an unrealized non-cash loss on derivative instruments associated with 2012 oil hedges of $2.6 million after-tax, or $0.03 per share. First-quarter 2011 results had a $12.8 million ($0.15 per share) after-tax non-cash loss on derivative instruments.
Oil, gas and natural gas liquids (NGLs) revenue in the first quarter of 2012 totaled $411.3 million as compared to $414.0 million in the same period of 2011. First-quarter 2012 cash flow from operations was $303.0 million versus $304.6 million a year ago(1).
First-quarter 2012 production volumes averaged 603.5 million cubic feet equivalent (MMcfe) per day as compared to first-quarter 2011 output of 590.0 MMcfe per day. Permian Basin oil production grew 50% to a record 21,800 barrels per day. Overall oil production also reached an all-time high of 29,562 barrels per day.
Combined Permian and Mid-Continent first-quarter 2012 volumes averaged 554.2 MMcfe per day, growing 26% over the same period in 2011. First-quarter 2012 production volumes were 53% gas, 29% oil and 18% NGLs.
First-quarter 2012 realized oil prices increased 9% to $99.28 per barrel, while natural gas liquids prices fell 10% to $36.66 per barrel. Gas prices averaged $2.92 per thousand cubic feet (Mcf) in the current quarter, a 34% decrease as compared to the first quarter of 2011.
2012 Outlook
Second-quarter 2012 production estimates incorporate the anticipated volume impact of known processing plant turnarounds and likely periods of Cana-Woodford ethane rejection, which together are expected to reduce second-quarter production by approximately 10-12 MMcfe/d. Second-quarter 2012 combined Permian Basin and Mid-Continent (PB/MC) production is projected to average 550-560 MMcfe/d, an increase of 18-20% over second-quarter 2011. Gulf Coast volumes are estimated to average 30-40 MMcfe/d for second-quarter 2012. Total company second-quarter 2012 volumes are expected to average 580-600 MMcfe/d.
After including estimated second-quarter plant turnarounds and ethane rejection, full-year 2012 PB/MC production volumes are now projected to average 578-593 MMcfe/d, growing 19-22% over 2011. Gulf Coast volumes, assuming no drilling contribution, are projected to average 34-39 MMcfe/d for 2012, or approximately 6% of total estimated company volumes. Total Company 2012 volumes are projected to average 612-632 MMcfe/d, or 3-7% growth over 2011.
Our capital continues to shift towards more oil and liquids rich areas in the Permian Basin. As a result, oil volumes in the PB/MC are now expected to grow 25-29% versus previous estimate of 20-27% growth. With greater oil growth, total liquids are now expected to account for 47% of the total volumes in 2012 up from 44% in 2011.
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| 2012E Guidance |
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| 2011A | Updated Range | Previous Range |
Gas (MMcf/d) |
| 329 | 326 | - | 336 | 334 | - | 353 |
Oil (Mb/d) |
| 26.8 | 29.3 | - | 30.3 | 28.3 | - | 29.9 |
NGL (Mb/d) |
| 17.1 | 18.4 | - | 19.0 | 18.6 | - | 19.6 |
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Total (MMcfe/d) | 592 | 612 | - | 632 | 615 | - | 650 |
% Liquids |
| 44% | 47% | 46% |
First-quarter 2012 investment for exploration and development (E&D) totaled $399.7 million. Full-year 2012 E&D capital investment is still expected to range from $1.4-$1.6 billion. Nearly all the 2012 capital is directed towards oil drilling or liquids-rich gas in the Permian and Cana-Woodford. We have a large inventory of drilling opportunities, limited lease expirations and few service commitments. Actual amount invested will depend on our calculated rate of return which is significantly influenced by commodity prices.
Expenses for 2012 are expected to fall within the following ranges:
Expenses ($/Mcfe): |
|
| Production expense | $1.15 - $1.35 |
| Transportation expense | 0.28 - 0.33 |
| DD&A and ARO accretion | 2.10 - 2.30 |
| General and administrative expense | 0.25 - 0.30 |
| Taxes other than income (% of oil and gas revenue) | 6.5% - 7.0% |
Other
On April 5, 2012, Cimarex completed its public offering of $750 million aggregate principal amount of its 5.875% Senior Notes due 2022. Net proceeds from the offering of approximately $737 million is funding its repayment of all outstanding $350 million 7.125% Senior Notes due 2017 and repaying all borrowings under its senior revolving credit facility. As of the end of the first-quarter on a pro forma basis Cimarex had cash of $156 million, no bank debt and its only long-term debt consisting of the $750 million 5.875% Senior notes due 2022.
Pro forma for the $750 million Senior Notes offering, long-term debt at March 31, 2012 was $750 million, resulting in a pro forma debt to total capitalization ratio of 19%(4).
Cimarex has oil contracts covering on average approximately 14,000 barrels of oil per day for the balance of 2012. The following table summarizes the open hedge positions:
Oil Contracts |
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| Weighted Average Price |
Period |
| Type |
| Daily
Volume(2) |
| Index(3) |
| Floor |
| Ceiling |
Months of Apr.-Dec. 12 |
| Collar |
| 14,000 |
| WTI |
| $ | 80.00 |
| $ | 119.35 |
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Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method. First-quarter 2012 had non-cash mark-to-market losses of $4.1 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 and completed 73 gross (40 net) wells during the first quarter of 2012, investing $399.7 million on exploration and development. Of total expenditures, 50% were invested in projects located in the Permian Basin; 45% in the Mid-Continent area; and 5% in the Gulf Coast and other.
Wells Drilled and Completed by Region |
|
|
| For the Three Months |
|
| Ended March 31, |
|
| 2012 | 2011 |
Gross wells |
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|
Permian Basin |
| 39 | 26 |
Mid-Continent |
| 33 | 37 |
Gulf Coast/Other |
| 1 | 2 |
|
| 73 | 65 |
Net wells |
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|
Permian Basin |
| 27 | 20 |
Mid-Continent |
| 12 | 13 |
Gulf Coast/Other |
| 1 | 2 |
|
| 40 | 35 |
% Gross wells completed as producers |
| 95% | 97% |
At quarter-end 24 net wells were drilled and awaiting completion: 18 Mid-Continent and six Permian Basin. Cimarex currently has 24 operated rigs running; 14 in the Permian Basin and 10 in the Mid-Continent.
Permian Basin
Cimarex drilled and completed 39 gross (27 net) Permian Basin wells during the first quarter of 2012, completing 95% as producers. At quarter-end, 12 gross (6 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. First-quarter 2012 Permian production averaged 240.3 MMcfe/d, an increase of 38% over first-quarter 2011, which included 50% growth in oil volumes to 21,800 barrels per day.
First-quarter New Mexico Bone Spring wells drilled and completed totaled 13 gross (6 net). Per-well 30-day gross production from the 2012 Bone Spring wells averaged 590 barrels equivalent (Boe) per day (87% oil). Texas Third Bone Spring drilling totaled 5 gross (5 net) wells, which had per-well 30-day average gross production rates of 800 barrels equivalent per day (82% oil).
Cimarex continues to evaluate multiple shale intervals in the Delaware Basin, with the majority of the unconventional drilling to date focused on the Wolfcamp. Most of the Wolfcamp drilling has been in southern Eddy County New Mexico (White City) and northern Culberson County Texas. In the first-quarter 2012, two Wolfcamp wells were drilled and completed bringing total wells in the play to 20 gross (19 net). First 30-day production, per well has averaged 6.6 MMcfe/d, comprised of 3.1 MMcf/d gas, 250 barrels per day of oil and 340 barrels per day of NGLs (assuming full NGL recovery), or 47% gas, 23% oil and 30% NGL.
Mid-Continent
In the first quarter of 2012 Cimarex drilled and completed 33 gross (12 net) Mid-Content wells. At quarter-end, 39 gross (18 net) wells were awaiting completion. Mid-Continent production averaged 313.9 MMcfe/d for the first quarter of 2012, an 18% increase over first-quarter 2011 average of 266.0 MMcfe/d.
For the first-quarter, essentially all the drilling activity was in the Anadarko Basin, Cana-Woodford shale play, where Cimarex drilled and completed 24 gross (11 net) wells. At March 31, 2012 there were 39 gross (18 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 of infill development drilling in 2012.
Since the Cana play began in late 2007, Cimarex has participated in 366 gross (135 net) wells. First-quarter 2012 net production from Cana-Woodford averaged 161.3 MMcfe/d, a 56% increase versus the first-quarter 2011 average of 103.5 MMcfe/d.
Gulf Coast
Cimarex participated in one (0.5 net) outside operated Yegua/Cook Mountain well in the first quarter, which was unsuccessful. Gulf Coast production averaged 47.6 MMcfe/d for the first quarter of 2012, a 68% decrease as compared to the first-quarter 2011 average of 148.9 MMcfe/d. The decreased output is a result of natural decline in highly-productive wells drilled near Beaumont, Texas and lack of exploration success.
Production by Region
Cimarex's average daily production by commodity and region is summarized below:
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| For the Three Months Ended |
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| March 31, |
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| 2012 |
| 2011 |
Gas (Mcf per day) |
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Permian Basin |
| 75,094 |
| 68,836 |
Mid-Continent |
| 216,825 |
| 189,345 |
Gulf Coast/Other |
| 28,052 |
| 69,443 |
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| 319,971 |
| 327,624 |
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Oil (Barrels per day) |
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Permian Basin |
| 21,800 |
| 14,541 |
Mid-Continent |
| 5,891 |
| 5,237 |
Gulf Coast/Other |
| 1,871 |
| 7,010 |
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|
| 29,562 |
| 26,788 |
NGL (Barrels per day) |
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Permian Basin |
| 5,742 |
| 2,941 |
Mid-Continent |
| 10,283 |
| 7,542 |
Gulf Coast/Other |
| 1,662 |
| 6,464 |
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|
| 17,687 |
| 16,947 |
Total Equivalent (Mcfe per day) |
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Permian Basin |
| 240,346 |
| 173,728 |
Mid-Continent |
| 313,869 |
| 266,019 |
Gulf Coast/Other |
| 49,251 |
| 150,287 |
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| 603,466 |
| 590,034 |
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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 # 70579385 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 # 70579385. 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) | 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 $750 million divided by long-term debt of $750 million plus stockholders' equity of $3,230.5 million. |
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RECONCILIATION OF CASH FLOW FROM OPERATIONS |
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| For the Three Months Ended |
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| March 31, |
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| 2012 |
| 2011 |
|
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| (in thousands) |
Net cash provided by operating activities | $ | 251,892 | $ | 265,277 |
| Change in operating assets |
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| and liabilities |
| 51,064 |
| 39,343 |
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Cash flow from operations | $ | 302,956 | $ | 304,620 |
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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. |
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PRICE AND PRODUCTION DATA |
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| For the Three Months Ended |
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| March 31, |
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| 2012 |
| 2011 |
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| Total gas production - Mcf |
| 29,117,317 |
| 29,486,147 |
| Gas volume - Mcf per day |
| 319,971 |
| 327,624 |
| Gas price - per Mcf |
| $2.92 |
| $4.45 |
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| Total oil production - barrels |
| 2,690,140 |
| 2,410,919 |
| Oil volume - barrels per day |
| 29,562 |
| 26,788 |
| Oil price - per barrel |
| $99.28 |
| $91.46 |
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| Total NGL production - barrels |
| 1,609,547 |
| 1,525,226 |
| NGL volume - barrels per day |
| 17,687 |
| 16,947 |
| NGL price - per barrel |
| $36.66 |
| $40.77 |
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OIL AND GAS CAPITALIZED EXPENDITURES |
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| For the Three Months Ended |
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| March 31, |
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| 2012 |
| 2011 |
|
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| (in thousands) |
| Acquisitions: |
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| Proved | $ | 51 | $ | - |
| Unproved |
| 1,922 |
| 441 |
|
|
| 1,973 |
| 441 |
| Exploration and development: |
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|
| Land and Seismic |
| 37,212 |
| 32,426 |
| Exploration and development |
| 362,499 |
| 304,575 |
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| 399,711 |
| 337,001 |
| Sale proceeds: |
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| Proved |
| (171) |
| (11,354) |
| Unproved |
| (942) |
| (494) |
|
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| (1,113) |
| (11,848) |
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| $ | 400,571 | $ | 325,594 |
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CONDENSED COMPREHENSIVE STATEMENTS OF OPERATIONS (unaudited) |
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| For the Three Months Ended |
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| March 31, |
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| 2012 |
| 2011 |
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| (In thousands, except per share data) |
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Revenues: |
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| Gas sales |
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| $ | 85,153 | $ | 131,323 |
| Oil sales |
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|
| 267,084 |
| 220,499 |
| NGL sales |
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| 59,014 |
| 62,190 |
| Gas gathering, processing and other, net |
| 11,785 |
| 12,584 |
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| 423,036 |
| 426,596 |
Costs and expenses: |
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| Depreciation, depletion, amortization and accretion |
| 121,787 |
| 86,964 |
| Production |
|
| 67,625 |
| 58,480 |
| Transportation |
| 15,606 |
| 13,446 |
| Gas gathering and processing |
| 2,561 |
| 4,551 |
| Taxes other than income |
| 25,160 |
| 33,597 |
| General and administrative |
| 14,147 |
| 14,727 |
| Stock compensation, net |
| 4,534 |
| 4,750 |
| Loss on derivative instruments, net |
| 4,088 |
| 18,244 |
| Other operating, net |
| 2,340 |
| 3,374 |
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| 257,848 |
| 238,133 |
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Operating income |
| 165,188 |
| 188,463 |
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Other (income) and expense: |
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| Interest expense |
| 7,959 |
| 7,275 |
| Amortization of deferred financing costs |
| 709 |
| 1,705 |
| Capitalized interest |
| (7,804) |
| (7,225) |
| Other, net |
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| (4,726) |
| (604) |
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Income before income tax |
| 169,050 |
| 187,312 |
Income tax expense |
| 62,943 |
| 69,150 |
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Net income |
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| $ | 106,107 | $ | 118,162 |
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Earnings per share to common stockholders: |
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| Basic |
|
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| $ | 1.24 | $ | 1.38 |
| Diluted |
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| $ | 1.23 | $ | 1.37 |
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Dividends per share | $ | 0.12 | $ | 0.10 |
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Shares attributable to common stockholders: |
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| Unrestricted common shares outstanding |
| 83,937 |
| 83,546 |
| Diluted common shares |
| 84,307 |
| 83,984 |
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Shares attributable to common stockholders and participating securities: |
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|
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| Basic shares outstanding |
| 85,777 |
| 85,626 |
| Fully diluted shares |
| 86,147 |
| 86,064 |
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Comprehensive income: |
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| Net income |
| $ | 106,107 | $ | 118,162 |
| Other comprehensive income: |
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| Change in fair value of investments, net of tax |
| 399 |
| 159 |
| Total comprehensive income | $ | 106,506 | $ | 118,321 |
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CONDENSED CASH FLOW STATEMENTS (unaudited) |
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| For the Three Months Ended |
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| March 31, |
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| 2012 |
| 2011 |
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| (In thousands) |
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|
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Cash flows from operating activities: |
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|
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| Net income |
| $ | 106,107 | $ | 118,162 |
| Adjustment to reconcile net income to net cash |
|
|
|
|
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| provided by operating activities: |
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|
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|
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| Depreciation, depletion, amortization and accretion |
| 121,787 |
| 86,964 |
|
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| Deferred income taxes |
| 62,943 |
| 69,698 |
|
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| Stock compensation, net |
| 4,534 |
| 4,750 |
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| Derivative instruments, net |
| 4,088 |
| 20,278 |
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| Changes in non-current assets and liabilities |
| 2,239 |
| 2,738 |
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| Amortization of deferred financing costs |
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| and other, net |
| 1,258 |
| 2,030 |
| Changes in operating assets and liabilities: |
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|
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| (Increase) decrease in receivables, net |
| (2,144) |
| 2,022 |
|
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| (Increase) decrease in other current assets |
| 69 |
| (3,005) |
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| Decrease in accounts payable and |
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|
|
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|
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| accrued liabilities |
| (48,989) |
| (38,360) |
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|
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| Net cash provided by operating activities |
| 251,892 |
| 265,277 |
Cash flows from investing activities: |
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|
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| Oil and gas expenditures |
| (398,103) |
| (310,182) |
| Sales of oil and gas and other assets |
| 1,322 |
| 12,037 |
| Other expenditures |
| (13,160) |
| (24,506) |
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| Net cash used by investing activities |
| (409,941) |
| (322,651) |
Cash flows from financing activities: |
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| Net increase in bank debt |
| 167,000 |
| - |
| Dividends paid |
|
| (8,576) |
| (6,849) |
| Issuance of common stock and other |
| 1,625 |
| 4,243 |
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| Net cash provided by (used in) financing activities |
| 160,049 |
| (2,606) |
Net change in cash and cash equivalents |
| 2,000 |
| (59,980) |
Cash and cash equivalents at beginning of period |
| 2,406 |
| 114,126 |
Cash and cash equivalents at end of period | $ | 4,406 | $ | 54,146 |
CONDENSED BALANCE SHEETS (unaudited) |
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| March 31, |
| December 31, |
Assets |
| 2012 |
| 2011 |
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| (In thousands, except share data) |
Current assets: |
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| Cash and cash equivalents | $ | 4,406 | $ | 2,406 |
| Receivables, net |
| 361,553 |
| 359,409 |
| Oil and gas well equipment and supplies |
| 84,808 |
| 85,141 |
| Deferred income taxes |
| 5,876 |
| 2,723 |
| Other current assets |
| 8,480 |
| 8,216 |
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| Total current assets |
| 465,123 |
| 457,895 |
Oil and gas properties at cost, using the full cost method of accounting: |
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| Proved properties |
| 10,302,527 |
| 9,933,517 |
| Unproved properties and properties under development, |
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| not being amortized |
| 642,506 |
| 607,219 |
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| 10,945,033 |
| 10,540,736 |
| Less – accumulated depreciation, depletion and amortization |
| (6,525,077) |
| (6,414,528) |
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| Net oil and gas properties |
| 4,419,956 |
| 4,126,208 |
Fixed assets, net |
| 123,534 |
| 118,215 |
Goodwill |
|
|
|
| 691,432 |
| 691,432 |
Other assets, net |
| 36,404 |
| 34,827 |
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|
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| $ | 5,736,449 | $ | 5,428,577 |
Liabilities and Stockholders' Equity |
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Current liabilities: |
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|
|
| Accounts payable | $ | 61,462 | $ | 79,788 |
| Accrued liabilities |
| 364,804 |
| 385,651 |
| Derivative instruments |
| 4,333 |
| 245 |
| Revenue payable |
| 157,159 |
| 150,655 |
|
| Total current liabilities |
| 587,758 |
| 616,339 |
Long-term debt |
|
| 572,000 |
| 405,000 |
Deferred income taxes |
| 1,041,257 |
| 974,932 |
Other liabilities |
|
| 304,972 |
| 301,693 |
|
| Total liabilities |
| 2,505,987 |
| 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, |
|
|
|
|
|
| 85,718,280 and 85,774,084 shares issued, respectively |
| 857 |
| 858 |
| Paid-in capital |
| 1,912,125 |
| 1,908,506 |
| Retained earnings |
| 1,317,095 |
| 1,221,263 |
| Accumulated other comprehensive income (loss) |
| 385 |
| (14) |
|
|
|
|
|
|
|
| 3,230,462 |
| 3,130,613 |
|
|
|
|
|
|
| $ | 5,736,449 | $ | 5,428,577 |
|
|
|
|
|
|
|
|
|
|
|
CONTACT: Mark Burford, Vice President – Capital Markets and Planning of Cimarex Energy Co., +1-303-295-3995
