Cimarex Energy Reports Second-Quarter 2012 Results
DENVER, Aug. 2, 2012 /PRNewswire/ — Cimarex Energy Co. (NYSE: XEC) today reported second-quarter 2012 net income of $64.3 million, or $0.74 per diluted share. This compares to second-quarter 2011 earnings of $166.7 million, or $1.94 per diluted share.
Second-quarter 2012 net income includes an unrealized non-cash gain on derivative instruments associated with 2012 oil hedges of $10.1 million ($0.07 per share after-tax) and a loss on early extinguishment of debt of $16.2 million ($0.12 per share after-tax). Second-quarter 2011 results had an unrealized non-cash gain on derivative instruments associated with 2011 oil and gas hedges of $22.5 million, or $0.16 per share after-tax.
Oil, gas and natural gas liquids (NGLs) revenue in the second quarter of 2012 totaled $343.2 million as compared to $452.3 million in the same period of 2011. Second-quarter 2012 adjusted cash flow from operations was $240.5 million versus $343.4 million a year ago(1).
The decrease in second-quarter revenues and cash flow is primarily a result of lower oil, NGL and gas prices. Second-quarter 2012 realized oil prices decreased 12% to $87.81 per barrel, NGL prices fell 36% to $29.02 per barrel and gas prices dropped 49% to $2.42 per thousand cubic feet (Mcf), as compared to a year ago.
Second-quarter 2012 production volumes averaged 590.1 million cubic feet equivalent (MMcfe) per day as compared to second-quarter 2011 output of 585.7 MMcfe per day. Oil production grew 8% to 28,686 barrels per day. Total second-quarter 2012 production volumes were 54% gas, 29% oil and 17% NGLs.
Permian Basin oil production grew 37% to 21,694 barrels per day. Combined Permian and Mid-Continent second-quarter volumes averaged 547.7 MMcfe per day, growing 17% over the same period in 2011. Overall production volumes were impacted by Permian processing plant turnarounds and Cana-Woodford ethane rejection, which together reduced second-quarter production by approximately 17-19 MMcfe/d.
2012 Outlook
Full-year guidance is unchanged, with higher projected oil production from the Permian offsetting Cana-Woodford ethane rejection seen in the second-quarter and further anticipated in third-quarter. Total Company 2012 volumes are projected to average 612-632 MMcfe/d, 3-7% growth over 2011. Permian Basin and Mid-Continent (PB/MC) 2012 production volumes are projected to average 575-590 MMcfe/d, growing 18-21% over 2011. Gulf Coast volumes are expected to average 37-42 MMcfe/d for 2012, or approximately 6% of total estimated company volumes.
Total Company third-quarter 2012 volumes are estimated to average 610-640 MMcfe/d, a 3-8% increase over third-quarter 2011. Third-quarter 2012 PB/MC production is expected to average 580-605 MMcfe/d, an increase of 14-19% over third-quarter 2011. Gulf Coast volumes are estimated to average 30-35 MMcfe/d for third-quarter 2012.
Capital continues to shift towards more oil and liquids-rich areas in the Permian Basin. Strong drilling results are causing an acceleration of oil volume growth. Combined PB/MC oil growth is now projected at 28-32% versus our original estimate of 20-27% growth.
2012E Guidance
--------------
2011A Updated Previous
Range Range
----- -----
Gas (MMcf/d) 329 320 - 330 326 - 336
Oil (Mb/d) 26.8 30.2 - 31.2 29.3 - 30.3
NGL (Mb/d) 17.1 18.5 - 19.1 18.4 - 19.0
---- ---- ---- ---- ----
Total (MMcfe/d) 592 612 - 632 612 - 632
% Liquids 44% 48% 47%
First-half 2012 exploration and development (E&D) investment totaled $782.6 million. Full-year 2012 E&D capital investment is still expected to range from $1.4-$1.6 billion. Nearly all the 2012 capital is directed towards oil drilling or liquids-rich gas in the Permian and Cana-Woodford.
Expenses for 2012 are expected to fall within the following ranges:
Expenses ($/Mcfe):
Production expense $1.15 - $1.30
Transportation expense 0.28 - 0.33
DD&A and ARO accretion 2.25 - 2.45
General and administrative expense 0.25 - 0.30
Taxes other than income (% of oil
and gas revenue) 6.5% - 7.0%
Other
In July 2012, Cimarex increased bank commitments under its senior unsecured revolving credit facility from $800 million to $1 billion. The borrowing base remains unchanged at $2 billion. At June 30, 2012 Cimarex had no bank debt outstanding.
On April 5, 2012, Cimarex completed a public offering of $750 million aggregate principal amount of 5.875% Senior Notes due 2022. Net proceeds were approximately $737 million, which funded the repayment of all outstanding $350 million 7.125% Senior Notes due 2017 and all borrowings under the senior revolving credit facility. The repayment of the 7.125% notes due 2017 resulted in a $16.2 million ($0.12 per share after-tax) charge for early extinguishment of debt.
Long-term debt at June 30, 2012 was $750 million, comprised only of the 5.875% Senior Notes due in 2022. Debt to total capitalization ratio at quarter-end was 19% ((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 Index(3) Floor Ceiling
Volume(2)
--- --------
Months of Jul.-Dec. 12 Collar 14,000 WTI $80.00 $119.35
Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method. Second-quarter 2012 had a non-cash mark-to-market gain of $10.1 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 160 gross (91 net) wells during the first-half of 2012, completing 96% as producers. Exploration and development capital for the year has totaled $782.6 million. 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 Six Months
Ended June 30, Ended June 30,
-------------- --------------
2012 2011 2012 2011
---- ---- ---- ----
Gross wells
Permian
Basin 55 45 94 71
Mid-
Continent 31 49 64 86
Gulf Coast/
Other 1 1 2 3
--- --- --- ---
87 95 160 160
Net wells
Permian
Basin 37 36 64 56
Mid-
Continent 14 19 26 32
Gulf Coast/
Other - - 1 2
--- --- --- ---
51 55 91 90
% Gross
wells
completed
as
producers 97% 96% 96% 96%
At quarter-end 35 net wells were drilled and awaiting completion: 25 Mid-Continent and ten Permian Basin. Cimarex currently has 22 operated rigs running; 14 in the Permian Basin and eight in the Mid-Continent.
Permian Basin
Cimarex drilled and completed 94 gross (64 net) Permian Basin wells during the first six months of 2012, completing 95% as producers. At quarter-end, 12 gross (ten 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. Second-quarter 2012 Permian production averaged 247.5 MMcfe/d, an increase of 36% over second-quarter 2011, which included 37% growth in oil volumes to 21,694 barrels per day.
Year-to-date 2012 New Mexico Bone Spring wells drilled and completed totaled 31 gross (16 net). Per-well 30-day gross production from the 2012 Bone Spring wells averaged over 600 barrels equivalent (Boe) per day (87% oil). Texas Third Bone Spring drilling totaled 19 gross (12 net) wells, which had per-well 30-day average gross production rates of 850 barrels equivalent per day (79% 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 6 gross (5.9 net) horizontal Wolfcamp wells, bringing total wells in the play to 24 gross (22.7 net). Per well first-30 day production rates on all the wells drilled to date have averaged 6.5 MMcfe/d, comprised of 2.8 MMcf/d gas, 270 barrels per day of oil and 350 barrels per day of NGLs (assuming full NGL recovery), or 43% gas, 25% oil and 32% NGL. Per well first-30 day production from the wells brought on this quarter averaged 6.7 MMcfe/d, comprised of 2.6 MMcf/d gas, 345 barrels per day of oil and 335 barrels per day of NGLs (assuming full NGL recovery), or 39% gas, 31% oil and 30% NGL.
Mid-Continent
In the first half of 2012 Cimarex drilled and completed 64 gross (26 net) Mid-Continent wells. At quarter-end, 59 gross (25 net) wells were awaiting completion. Mid-Continent production averaged 300.2 MMcfe/d for the second quarter of 2012, a 5% increase over second-quarter 2011 average of 284.7 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 60 gross (25 net) wells. At June 30, 2012 there were 57 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 414 gross (155 net) wells. Second-quarter 2012 net Cana production averaged 156.2 MMcfe/d, a 36% increase versus the second-quarter 2011 average of 115.1 MMcfe/d.
Gulf Coast
Cimarex participated in two (0.7 net) outside operated Yegua/Cook Mountain wells in the first half of 2012, of which one was successful. Gulf Coast production averaged 41.0 MMcfe/d for the second quarter of 2012, a 65% decrease as compared to the second-quarter 2011 average of 116.9 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 For the Six Months
Ended Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
Gas (Mcf
per day)
Permian
Basin 79,409 70,655 77,252 69,750
Mid-
Continent 214,339 194,038 215,582 191,705
Gulf Coast/
Other 23,577 60,048 25,814 64,720
------ ------ ------ ------
317,325 324,741 318,648 326,175
Oil
(Barrels
per day)
Permian
Basin 21,694 15,780 21,747 15,164
Mid-
Continent 5,392 5,960 5,642 5,601
Gulf Coast/
Other 1,600 4,910 1,735 5,954
----- ----- ----- -----
28,686 26,650 29,124 26,719
NGL
(Barrels
per day)
Permian
Basin 6,317 2,820 6,029 2,880
Mid-
Continent 8,914 9,144 9,598 8,348
Gulf Coast/
Other 1,539 4,880 1,602 5,667
----- ----- ----- -----
16,770 16,844 17,229 16,895
Total Equivalent (Mcfe per day)
Permian
Basin 247,475 182,255 243,908 178,014
Mid-
Continent 300,175 284,662 307,022 275,399
Gulf Coast/
Other 42,410 118,791 45,833 134,446
590,060 585,708 596,763 587,859
======= ======= ======= =======
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 # 10076721 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 # 10076721. 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 $750 million divided by long-term debt of $750 million plus stockholders’ equity of $3,292.0 million.
RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS
For the Three Months
Ended
For the Six Months
Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
(in thousands)
Net cash provided by
operating activities $323,040 $373,814 $574,932 $639,091
Change in operating assets
and liabilities
(82,530) (30,451) (31,466) 8,892
------- ------- ------- -----
Adjusted cash flow
from operations $240,510 $343,363 $543,466 $647,983
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 Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
Total gas production - Mcf 28,876,597 29,551,462 57,993,914 59,037,609
Gas volume - Mcf per day 317,325 324,741 318,648 326,175
Gas price - per Mcf $2.42 $4.75 $2.67 $4.60
Total oil production -
barrels 2,610,407 2,425,187 5,300,547 4,836,106
Oil volume -barrels per
day 28,686 26,650 29,124 26,719
Oil price - per barrel $87.81 $100.12 $93.63 $95.80
Total NGL production -
barrels 1,526,067 1,532,813 3,135,614 3,058,039
NGL volume -barrels per
day 16,770 16,844 17,229 16,895
NGL price - per barrel $29.02 $45.06 $32.94 $42.92
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
(in thousands)
Acquisitions:
Proved $240 $9,165 $291 $9,165
Unproved 4,791 11,606 6,713 12,047
----- ------ ----- ------
5,031 20,771 7,004 21,212
Exploration and development:
Land and Seismic 21,175 52,499 58,387 84,925
Exploration and development 361,743 367,486 724,242 672,061
------- ------- ------- -------
382,918 419,985 782,629 756,986
Sale proceeds:
Proved (14) (7,129) (185) (18,483)
Unproved (146) (1,327) (1,088) (1,821)
---- ------ ------ ------
(160) (8,456) (1,273) (20,304)
$387,789 $432,300 $788,360 $757,894
-------- -------- -------- --------
CONDENSED COMPREHENSIVE STATEMENTS OF OPERATIONS (unaudited)
For the Three Months For the Six Months
Ended Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
(In thousands, except per share data)
Revenues:
Gas sales $69,741 $140,377 $154,894 $271,700
Oil sales 229,210 242,812 496,294 463,311
NGL sales 44,286 69,069 103,300 131,259
Gas gathering,
processing and
other, net 9,885 14,955 21,670 27,539
353,122 467,213 776,158 893,809
------- ------- ------- -------
Costs and expenses:
Depreciation,
depletion,
amortization and
accretion 123,678 92,554 245,465 179,518
Production 62,494 60,745 130,119 119,225
Transportation 15,260 16,387 30,866 29,833
Gas gathering and
processing 2,864 4,630 5,425 9,181
Taxes other than
income 23,483 34,495 48,643 68,092
General and
administrative 12,634 10,617 26,781 25,344
Stock compensation,
net 4,684 4,617 9,218 9,367
Gain on derivative
instruments, net (10,078) (22,477) (5,990) (4,233)
Other operating,
net 2,719 2,342 5,059 5,716
237,738 203,910 495,586 442,043
------- ------- ------- -------
Operating income 115,384 263,303 280,572 451,766
Other (income) and expense:
Interest expense 12,702 7,638 20,661 14,913
Amortization of
deferred financing
costs 977 1,702 1,686 3,407
Capitalized
interest (9,119) (7,352) (16,923) (14,577)
Loss on early
extinguishment of
debt 16,214 - 16,214 -
Other, net (7,829) (3,018) (12,555) (3,622)
Income before income tax 102,439 264,333 271,489 451,645
Income tax expense 38,137 97,584 101,080 166,734
------ ------ ------- -------
Net income $64,302 $166,749 $170,409 $284,911
======= ======== ======== ========
Earnings per share to common stockholders:
Basic $0.75 $1.95 $1.98 $3.33
Diluted $0.74 $1.94 $1.97 $3.31
Dividends per share $0.12 $0.10 $0.24 $0.20
===== ===== ===== =====
Shares attributable to common stockholders:
Unrestricted common
shares outstanding 83,984 83,635 83,984 83,635
Diluted common
shares 84,319 84,063 84,337 84,068
Shares attributable to common stockholders and
participating securities:
Basic shares
outstanding 86,046 85,655 86,046 85,655
Fully diluted
shares 86,381 86,083 86,399 86,088
Comprehensive income:
Net income $64,302 $166,749 $170,409 $284,911
Other comprehensive
income:
Change in fair
value of
investments,
net of tax (135) 9 264 168
Total comprehensive
income $64,167 $166,758 $170,673 $285,079
CONDENSED CASH FLOW STATEMENTS (unaudited)
For the Three Months
Ended For the Six Months Ended
June 30, June 30,
-------- --------
2012 2011 2012 2011
---- ---- ---- ----
(In thousands)
Cash flows from operating activities:
Net income $64,302 $166,749 $170,409 $284,911
Adjustment to reconcile
net income to net cash
provided by operating
activities:
Depreciation,
depletion,
amortization and
accretion 123,678 92,554 245,465 179,518
Deferred income
taxes 38,137 98,358 101,080 168,056
Stock compensation,
net 4,684 4,617 9,218 9,367
Derivative
instruments, net (10,078) (22,441) (5,990) (2,163)
Loss on early
extinguishment of
debt 16,214 - 16,214 -
Changes in non-
current assets and
liabilities 2,876 1,821 5,115 4,559
Amortization of
deferred financing
costs and other,
net
697 1,705 1,955 3,735
Changes in operating
assets and liabilities:
Decrease in
receivables, net 109,978 15,527 107,834 17,549
Increase in other
current assets (4,979) (6,689) (4,910) (9,694)
Increase (decrease)
in accounts
payable and
accrued liabilities
(22,469) 21,613 (71,458) (16,747)
Net cash
provided
by
operating
activities 323,040 373,814 574,932 639,091
------- ------- ------- -------
Cash flows from investing activities:
Oil and gas expenditures (354,287) (389,119) (752,390) (699,301)
Sales of oil and gas and
other assets 359 8,609 1,681 20,646
Other expenditures (19,145) (28,383) (32,305) (52,889)
Net cash used
by investing
activities (373,073) (408,893) (783,014) (731,544)
-------- -------- -------- --------
Cash flows from financing activities:
Net decrease in bank debt (222,000) - (55,000) -
Increase in other long-
term debt 750,000 - 750,000 -
Decrease in other long-
term debt (363,595) - (363,595) -
Financing costs incurred (12,200) (100) (12,692) (100)
Dividends paid (10,293) (8,566) (18,869) (15,415)
Issuance of common stock
and other 647 2,749 2,764 6,992
Net cash
provided by
(used in)
financing
activities 142,559 (5,917) 302,608 (8,523)
------- ------ ------- ------
Net change in cash and cash equivalents 92,526 (40,996) 94,526 (100,976)
Cash and cash equivalents at beginning of period 4,406 54,146 2,406 114,126
----- ------ ----- -------
Cash and cash equivalents at end of period $96,932 $13,150 $96,932 $13,150
------- ------- ------- -------
CONDENSED BALANCE SHEETS (unaudited)
June 30, December 31,
Assets 2012 2011
---- ----
(In thousands, except share
data)
Current assets:
Cash and cash
equivalents $96,932 $2,406
Receivables, net 251,575 359,409
Oil and gas well
equipment and
supplies 91,062 85,141
Deferred income
taxes 1,193 2,723
Derivative
instruments 5,745 -
Other current
assets 7,205 8,216
Total current
assets 453,712 457,895
------- -------
Oil and gas properties at cost, using the full cost
method of accounting:
Proved properties 10,697,029 9,933,517
Unproved properties
and properties
under development,
not being
amortized 647,673 607,219
------- -------
11,344,702 10,540,736
Less - accumulated
depreciation,
depletion and
amortization (6,638,311) (6,414,528)
---
Net oil and gas
properties 4,706,391 4,126,208
--------- ---------
Fixed assets, net 133,463 118,215
Goodwill 691,432 691,432
Other assets, net 46,306 34,827
------ ------
$6,031,304 $5,428,577
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $52,170 $79,788
Accrued liabilities 424,993 385,651
Derivative
instruments - 245
Revenue payable 133,186 150,655
Total current
liabilities 610,349 616,339
------- -------
Long-term debt 750,000 405,000
Deferred income taxes 1,074,633 974,932
Other liabilities 304,348 301,693
Total
liabilities 2,739,330 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,
85,987,555 and
85,774,084
shares issued,
respectively 860 858
Paid-in capital 1,919,777 1,908,506
Retained earnings 1,371,087 1,221,263
Accumulated other
comprehensive
income (loss) 250 (14)
3,291,974 3,130,613
--------- ---------
$6,031,304 $5,428,577
========== ==========
SOURCE Cimarex Energy Co.
