Cimarex Energy Reports Third-Quarter 2012 Results
DENVER, Nov. 2, 2012 /PRNewswire/ — Cimarex Energy Co. (NYSE: XEC) today reported third-quarter 2012 net income of $84.3 million, or $0.97 per diluted share. This compares to third-quarter 2011 earnings of $128.2 million, or $1.49 per diluted share.
Third-quarter 2012 net income includes an unrealized non-cash loss on derivative instruments associated with 2012 oil hedges of $5.3 million, or $0.04 per share after-tax. Third-quarter 2011 net income had an unrealized non-cash gain on derivative instruments associated with 2011 oil and gas hedges of $5.4 million, or $0.04 per share after-tax.
Third-quarter 2012 production volumes averaged an all-time high 635.1 million cubic feet equivalent (MMcfe), per day, a 7% increase as compared to third-quarter 2011 output of 592.0 MMcfe per day. Oil production grew 23% to a record 32,456 barrels per day. Permian Basin oil production grew 42% to 25,000 barrels per day. Combined Permian and Mid-Continent third-quarter volumes averaged 598.8 MMcfe per day, growing 18% over the same period in 2011. Total third-quarter 2012 production volumes were 51% gas, 31% oil and 18% natural gas liquids (NGL).
Oil, gas and NGL revenue in the third quarter of 2012 totaled $397.4 million as compared to $419.7 million in the same period of 2011. Third-quarter 2012 adjusted cash flow from operations was $291.2 million versus $356.8 million a year ago(1).
The decrease in third-quarter revenues and cash flow is primarily a result of lower gas and NGL prices, partially offset by higher liquids production. Third-quarter 2012 realized gas price fell 39% to $2.79 per thousand cubic feet (Mcf) and NGL prices dropped 34% to $28.55 per barrel, as compared to a year ago. Oil prices for the third quarter of 2012 averaged $88.18 per barrel flat with the third-quarter 2011 average price of $87.64 per barrel.
For the nine months ended September 30, 2012, net income totaled $254.7 million, or $2.93 per diluted share, as compared to $413.1 million, or $4.79 per diluted share, for the first nine months of 2011. Year-to-date through September 30, 2012 adjusted cash flow from operations totaled $834.6 million versus $1.0 billion for 2011(1).
2012 Outlook
Total Company fourth-quarter 2012 volumes are estimated to average 652-677 MMcfe/d, an 8-13% increase over fourth-quarter 2011. Fourth-quarter 2012 Permian Basin and Mid-Continent (PB/MC) production is expected to average 622-642 MMcfe/d, an increase of 17-21% over fourth-quarter 2011. Gulf Coast volumes are estimated to average 30-35 MMcfe/d for fourth-quarter 2012.
The resulting full-year 2012, total Company volumes are projected to average 620-626 MMcfe/d, 5-6% growth over 2011. PB/MC 2012 production volumes are projected to average 581-585 MMcfe/d, growing 19-20% over 2011. Gulf Coast volumes are expected to average 39-41 MMcfe/d for 2012.
Full-year 2012 exploration and development (E&D) capital investment is expected to be approximately $1.6 billion. E&D capital for the first nine months of 2011 totaled $1.2 billion.
Expenses for 2012 are expected to fall within the following ranges:
Expenses ($/Mcfe):
Production expense $1.11 - $1.16
Transportation expense 0.25 - 0.30
DD&A and ARO accretion 2.35 - 2.45
General and administrative expense 0.25 - 0.30
Taxes other than income (% of oil
and gas revenue) 6.0% - 6.5%
Other
Long-term debt at September 30, 2012 was $830 million, comprised of $750 million 5.875% Senior Notes due in 2022 and $80 million of borrowings under its senior unsecured revolving credit facility. Debt to total capitalization ratio at quarter-end was 20% ((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 Volume(2) Index(3) Floor Ceiling
------ ---- -------------- ------- ----- -------
Months of Oct.-Dec.
12 Collar 14,000 WTI $80.00 $119.35
Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method. Third-quarter 2012 had a non-cash mark-to-market loss of $5.3 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 253 gross (138 net) wells during the first nine months of 2012, completing 97% as producers. Exploration and development capital for the year has totaled $1.2 billion. 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 For the Nine
Months Months
Ended September Ended September
30, 30,
---------------- ----------------
2012 2011 2012 2011
---- ---- ---- ----
Gross wells
Permian Basin 37 35 131 106
Mid-Continent 55 42 119 128
Gulf Coast/Other 1 5 3 8
--- --- --- ---
93 82 253 242
Net wells
Permian Basin 24 23 88 79
Mid-Continent 23 20 49 52
Gulf Coast/Other 0 5 1 7
--- --- --- ---
47 48 138 138
% Gross wells completed
as producers 99% 94% 97% 95%
At quarter-end 39 net wells were drilled and awaiting completion: 28 Mid-Continent and 11 Permian Basin. Cimarex currently has 19 operated rigs running; 14 in the Permian Basin and five in the Mid-Continent.
Permian Basin
Cimarex drilled and completed 131 gross (88 net) Permian Basin wells during the first nine months of 2012, completing 96% as producers. At quarter-end, 18 gross (11 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. Third-quarter 2012 Permian production averaged 274.5 MMcfe/d, an increase of 33% over third-quarter 2011, which included 42% growth in oil volumes to 25,000 barrels per day.
Year-to-date 2012 New Mexico Bone Spring wells drilled and completed totaled 48 gross (24 net). Per-well 30-day gross production from the 2012 New Mexico Bone Spring wells averaged over 630 barrels equivalent (Boe) per day (86% oil). Texas Third Bone Spring drilling totaled 28 gross (18 net) wells, which had per-well 30-day average gross production rates of over 1,000 barrels equivalent per day (80% 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 11 gross (10 net) horizontal Wolfcamp wells, bringing total wells in the play to 29 gross (27 net). Per well first-30 day production rates on all the wells drilled to date have averaged 6.4 MMcfe/d, comprised of 2.8 MMcf/d gas, 275 barrels per day of oil and 330 barrels per day of NGLs (assuming full NGL recovery), or 43% gas, 26% oil and 31% NGL.
Mid-Continent
In the first nine months of 2012 Cimarex drilled and completed 119 gross (49 net) Mid-Continent wells. At quarter-end, 64 gross (28 net) wells were awaiting completion. Mid-Continent production averaged 324.3 MMcfe/d for the third quarter of 2012, a 7% increase over third-quarter 2011 average of 303.1 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 113 gross (47 net) wells. At September 30, 2012 there were 54 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 464 gross (177 net) wells. Third-quarter 2012 net Cana production averaged 184.3 MMcfe/d, a 32% increase versus the third-quarter 2011 average of 139.2 MMcfe/d.
Gulf Coast
Cimarex participated in three gross (0.8 net) outside operated Yegua/Cook Mountain wells in 2012, of which one gross well was successful. Gulf Coast production averaged 35.1 MMcfe/d for the third quarter of 2012, a 57% decrease as compared to the third-quarter 2011 average of 81.8 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 Nine Months
Ended Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
Gas (Mcf
per day)
Permian
Basin 79,502 76,872 78,007 72,150
Mid-
Continent 224,009 209,459 218,411 197,688
Gulf Coast/
Other 20,735 43,334 24,110 57,513
------ ------ ------ ------
324,246 329,665 320,528 327,351
Oil
(Barrels
per day)
Permian
Basin 25,000 17,578 22,839 15,977
Mid-
Continent 6,120 5,720 5,802 5,641
Gulf Coast/
Other 1,336 2,986 1,602 4,954
----- ----- ----- -----
32,456 26,284 30,243 26,572
NGL
(Barrels
per day)
Permian
Basin 7,501 3,921 6,523 3,231
Mid-
Continent 10,598 9,885 9,934 8,866
Gulf Coast/
Other 1,261 3,632 1,487 4,981
----- ----- ----- -----
19,360 17,438 17,944 17,078
Total
Equivalent
(Mcfe per
day)
Permian
Basin 274,508 205,866 254,179 187,398
Mid-
Continent 324,317 303,089 312,827 284,730
Gulf Coast/
Other 36,318 83,045 42,644 117,127
635,143 592,000 609,650 589,255
======= ======= ======= =======
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 # 37850869 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 # 37850869. 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 $830 million divided by long-term debt of $830 million plus stockholders’ equity of $3,377.9 million.
RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS
For the Three Months Ended
For the Nine Months Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
(in thousands)
Net cash provided by operating
activities $261,216 $332,432 $836,148 $971,523
Change in operating assets
and liabilities 29,957 24,372 (1,509) 33,264
Adjusted cash flow from operations $291,173 $356,804 $834,639 $1,004,787
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 Nine Months Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
Total gas production - Mcf 29,830,627 30,329,145 87,824,541 89,366,754
Gas volume - Mcf per day 324,246 329,665 320,528 327,351
Gas price - per Mcf $2.79 $4.57 $2.71 $4.59
Total oil production - barrels 2,985,956 2,418,141 8,286,503 7,254,247
Oil volume - barrels per day 32,456 26,284 30,243 26,572
Oil price - per barrel $88.18 $87.64 $91.67 $93.08
Total NGL production - barrels 1,781,139 1,604,337 4,916,753 4,662,376
NGL volume - barrels per day 19,360 17,438 17,944 17,078
NGL price - per barrel $28.55 $43.11 $31.35 $42.99
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
(in thousands)
Acquisitions:
Proved $ - $12,439 $ - $21,604
Unproved 4,636 8,380 11,349 20,427
4,636 20,819 11,349 42,031
Exploration and development:
Land and Seismic 28,226 61,907 86,613 146,832
Exploration and development 389,989 360,733 1,120,740 1,032,794
418,215 422,640 1,207,353 1,179,626
Sale proceeds:
Proved (10,894) (83,709) (11,079) (102,192)
Unproved - (150) (1,088) (1,971)
(10,894) (83,859) (12,167) (104,163)
$411,957 $359,600 $1,206,535 $1,117,494
-------- -------- ---------- ----------
CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)
For the Nine Months Ended
For the Three Months Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
(In thousands, except per share data)
Revenues:
Gas sales $83,208 $138,631 $238,102 $410,331
Oil sales 263,315 211,928 759,609 675,239
NGL sales 50,860 69,169 154,160 200,428
Gas gathering,
processing and
other, net 9,529 14,081 31,199 41,620
406,912 433,809 1,183,070 1,327,618
------- ------- --------- ---------
Costs and expenses:
Depreciation,
depletion,
amortization and
accretion 139,499 108,259 384,964 287,777
Production 62,699 62,333 192,818 181,558
Transportation 14,481 13,754 40,966 41,559
Gas gathering and
processing 5,496 6,263 15,302 17,472
Taxes other than
income 24,095 30,533 72,738 98,625
General and
administrative 14,742 9,390 41,523 34,734
Stock compensation,
net 8,301 4,595 17,519 13,962
(Gain) loss on
derivative
instruments, net 5,329 (7,120) (661) (11,353)
Other operating,
net 2,236 2,379 7,295 8,095
276,878 230,386 772,464 672,429
------- ------- ------- -------
Operating income 130,034 203,423 410,606 655,189
Other (income) and expense:
Interest expense 12,191 7,278 32,852 22,192
Amortization of
deferred financing
costs 1,032 2,001 2,718 5,407
Capitalized
interest (9,231) (7,253) (26,154) (21,830)
Loss on early
extinguishment of
debt - - 16,214 -
Other, net (6,159) (3,604) (18,714) (7,226)
Income before income tax 132,201 205,001 403,690 656,646
Income tax expense 47,939 76,849 149,019 243,583
------ ------ ------- -------
Net income $84,262 $128,152 $254,671 $413,063
======= ======== ======== ========
Earnings per share to common stockholders:
Basic $0.97 $1.49 $2.94 $4.81
Diluted $0.97 $1.49 $2.93 $4.79
Dividends per share $0.12 $0.10 $0.36 $0.30
===== ===== ===== =====
Shares attributable to common stockholders:
Unrestricted common
shares outstanding 84,681 83,736 84,681 83,736
Diluted common
shares 84,997 84,115 85,021 84,151
Shares attributable to common stockholders and
participating securities:
Basic shares
outstanding 86,589 85,806 86,589 85,806
Fully diluted
shares 86,905 86,185 86,929 86,221
Comprehensive income:
Net income $84,262 $128,152 $254,671 $413,063
Other comprehensive
income:
Change in fair
value of
investments,
net of tax 238 (585) 502 (417)
Total comprehensive
income $84,500 $127,567 $255,173 $412,646
CONDENSED CASH FLOW STATEMENTS (unaudited)
For the Three Months Ended For the Nine Months Ended
September 30, September 30,
------------- -------------
2012 2011 2012 2011
---- ---- ---- ----
(In thousands)
Cash flows from operating activities:
Net income $84,262 $128,152 $254,671 $413,063
Adjustment to
reconcile net income
to net cash
provided by operating
activities:
Depreciation,
depletion,
amortization
and accretion 139,499 108,259 384,964 287,777
Deferred income
taxes 49,568 120,930 150,648 288,986
Stock
compensation,
net 8,301 4,595 17,519 13,962
Derivative
instruments,
net 5,329 (5,373) (661) (7,536)
Loss on early
extinguishment
of debt - - 16,214 -
Changes in non-
current assets
and liabilities 2,815 (840) 7,930 3,719
Amortization of
deferred
financing costs
and other, net 1,399 1,081 3,354 4,816
Changes in operating
assets and
liabilities:
(Increase)
decrease in
receivables,
net (83,436) (49,778) 24,398 (32,229)
Decrease in
other current
assets 13,673 40,430 8,763 30,736
Increase
(decrease) in
accounts
payable and
accrued
liabilities 39,806 (15,024) (31,652) (31,771)
------ ------- ------- -------
Net cash
provided
by
operating
activities 261,216 332,432 836,148 971,523
------- ------- ------- -------
Cash flows from investing activities:
Oil and gas
expenditures (423,134) (453,375) (1,181,742) (1,152,676)
Sales of oil and gas
assets 10,894 83,859 12,167 104,163
Sales of other assets 142 111,495 550 111,837
Other expenditures (16,826) (17,161) (42,913) (70,050)
------- ------- -------
Net cash
used by
investing
activities (428,924) (275,182) (1,211,938) (1,006,726)
-------- -------- ---------- ----------
Cash flows from financing activities:
Net increase in bank
debt 80,000 - 25,000 -
Increase in other
long-term debt - - 750,000 -
Decrease in other
long-term debt - - (363,595) -
Financing costs
incurred (1,129) (7,248) (13,821) (7,348)
Dividends paid (10,330) (8,583) (29,199) (23,998)
Issuance of common
stock and other 7,646 2,591 10,410 9,583
----- ----- ------
Net cash
provided by
(used in)
financing
activities 76,187 (13,240) 378,795 (21,763)
------ ------- ------- -------
Net change in cash and cash equivalents (91,521) 44,010 3,005 (56,966)
Cash and cash equivalents at beginning of period 96,932 13,150 2,406 114,126
------ ------ ----- -------
Cash and cash equivalents at end of period $5,411 $57,160 $5,411 $57,160
====== ======= ====== =======
CONDENSED BALANCE SHEETS (unaudited)
September 30, December 31,
Assets 2012 2011
---- ----
(In thousands, except share data)
Current assets:
Cash and cash
equivalents $5,411 $2,406
Receivables, net 335,011 359,409
Oil and gas well
equipment and
supplies 77,879 85,141
Deferred income
taxes 2,126 2,723
Derivative
instruments 416 -
Other current
assets 6,715 8,216
Total current
assets 427,558 457,895
------- -------
Oil and gas properties at cost, using the full cost
method of accounting:
Proved properties 11,116,783 9,933,517
Unproved properties
and properties
under development,
not being
amortized 661,626 607,219
------- -------
11,778,409 10,540,736
Less - accumulated
depreciation,
depletion and
amortization (6,767,943) (6,414,528)
---
Net oil and gas
properties 5,010,466 4,126,208
--------- ---------
Fixed assets, net 134,776 118,215
Goodwill 691,432 691,432
Other assets, net 49,023 34,827
------ ------
$6,313,255 $5,428,577
========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $64,988 $79,788
Accrued liabilities 434,966 385,651
Derivative
instruments - 245
Revenue payable 151,798 150,655
Total current
liabilities 651,752 616,339
------- -------
Long-term debt 830,000 405,000
Deferred income taxes 1,128,642 974,932
Other liabilities 324,914 301,693
Total
liabilities 2,935,308 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,
86,540,753 and
85,774,084
shares issued,
respectively 865 858
Paid-in capital 1,931,583 1,908,506
Retained earnings 1,445,011 1,221,263
Accumulated other
comprehensive
income (loss) 488 (14)
3,377,947 3,130,613
--------- ---------
$6,313,255 $5,428,577
========== ==========
SOURCE Cimarex Energy Co.
