August 3, 2016 - 5:05 PM EDT
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Cimarex Reports Second Quarter 2016 Results

Culberson Lower Wolfcamp Sets Record 30-day IP Rate of 3,127 BOE per day Two New Meramec Wells further Delineate the Play

DENVER, Aug. 3, 2016 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported a second quarter 2016 net loss of $270.3 million, or $2.91 per diluted share, including a non-cash impairment of oil and gas properties.  The adjusted second quarter net income (non-GAAP) was $7.0 million, or $0.07 per diluted share(1).  Second quarter 2016 net cash provided by operating activities was $128.6 million versus $257.4 million a year ago.  Adjusted cash flow from operations (non-GAAP) was $146.9 million versus $252.4 million a year ago(1)

Total company production averaged 974 million cubic feet equivalent (MMcfe) per day during the second quarter, a five percent decrease from second quarter 2015. Year-over-year natural gas volumes decreased one percent, oil volumes decreased 21 percent and NGL volumes were up 10 percent. 

Commodity prices continued to impact Cimarex's financial results for the quarter. Realized oil prices averaged $40.07 per barrel, down 21 percent versus a year ago but up 43 percent sequentially. Natural gas prices were down 27 percent year-over-year and averaged $1.82 per Mcf compared to $2.51 per Mcf.  NGL prices averaged $13.93 per barrel, down five percent from the second quarter of 2015 and up 42 percent sequentially.  (See table of Average Realized Price by Region below.)

Cimarex invested $314 million in exploration and development year-to-date, including $156 million during the second quarter, which was funded with cash flow from operations and cash on hand. Total debt at June 30, 2016, remained at $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $642 million. Debt was 39 percent of total capitalization(2)

2016 Outlook

Cimarex now estimates total production volumes for 2016 to average 980-1,000 MMcfe per day, up slightly from 2015 production of 985 MMcfe per day.  Oil volumes are expected to be 28 percent of total volumes and gas 47 percent.  Total company production for the third quarter 2016 is projected to average 950-980 MMcfe per day.  Capital investment for exploration and development is now estimated to be $750 million in 2016, up from previous guidance of $650-$700 million.  This additional capital will be used primarily to fund further drilling in the Meramec play and to accelerate well completions in both the Permian Basin and Mid-Continent region.  As a result, the company has increased its operated rig count to five rigs for the remainder of 2016.

Expenses per Mcfe of production for the remainder of 2016 are estimated to be: 


Production expense

$0.60 -  $0.75


Transportation, processing and other expense

  0.45  -  0.55


DD&A and ARO accretion*

  1.15  -  1.35


General and administrative expense**

  0.19  -  0.23


Taxes other than income (% of oil and gas revenue)

   5.5  -  6.0%


*Excludes the potential impact of any future ceiling test writedown.



**During the second quarter, a voluntary Early Retirement Incentive Program resulted in cash severance payments of $4.8

   million ($0.05/Mcfe). 

Operations Update

Cimarex invested $156 million in exploration and development during the second quarter, bringing the total for the first half of 2016 to $314 million. We completed 34 gross (14 net) wells during the quarter.   Year-to-date, 58 percent has been invested in the Permian Basin and 41 percent in the Mid-Continent. At June 30, 100 gross (46 net) wells were awaiting completion.  Cimarex currently is operating five drilling rigs.  

 

WELLS BROUGHT ON PRODUCTION BY REGION

















For the Three Months Ended



For the Six Months Ended




June 30,



June 30,




2016



2015



2016



2015


Gross wells













Permian Basin


13



26



20



68


Mid-Continent


21



19



36



30




34



45



56



98


Net wells













Permian Basin


9



18



12



48


Mid-Continent


5



6



7



9




14



24



19



57

 

Permian Region

Production from the Permian region averaged 508.5 MMcfe per day in the second quarter, a 15 percent decrease over second quarter 2015. Quarterly oil volumes decreased 27 percent year-over-year to 35,338 barrels per day and accounted for 42 percent of the region's total production for the quarter.

Cimarex completed and brought on production 13 gross (nine net) wells in the Permian region during the second quarter. The 13 gross wells completed include eight Second Bone Spring wells and five Wolfcamp wells (two in Culberson area and three in Reeves County).  On June 30, there were 26 gross (17 net) wells waiting on completion in the Delaware Basin including 16 gross (11 net) wells associated with multi-well infill and spacing projects that are expected to be completed in the second half of 2016.  Cimarex currently is operating three drilling rigs in the Delaware Basin with plans to maintain this rig count for the remainder of 2016.

Cimarex now has 15 10,000-foot Lower Wolfcamp wells producing in Culberson County, Texas.  These wells had an average 30-day initial gross peak production rate of 2,361 BOE per day (25 percent oil, 46 percent gas, 29 percent NGL).  Of note in this group is the recently completed Flying Ebony 19 State A #5H, which was completed using a larger stimulation.  Average 30-day gross peak production from this well was 3,127 BOE per day (23 percent oil, 47 percent gas, 30 percent NGL), which is 35 percent above the average of the previous 14 wells.

Mid-Continent

Production from the Mid-Continent averaged 463 MMcfe per day for the second quarter, a 10 percent increase over second quarter 2015 and a six percent decrease sequentially.  Natural gas production grew three percent year-over-year, and crude oil volumes were up 24 percent over second quarter 2015.  NGL volumes increased 23 percent over second quarter 2015.

During the second quarter, Cimarex completed and brought on production 21 gross (five net) wells in the Mid-Continent. At the end of the quarter, 74 gross (29 net) wells were waiting on completion including 62 gross (28 net) wells associated with multi-well infill and spacing projects that are expected to be completed in the second half of 2016.  Cimarex now anticipates completion activities for Woodford wells in the six-section Eastern Core infill development to commence in September 2016.  This was previously scheduled to commence in October.

Cimarex continues to make progress on the delineation of its 115,000 net Meramec acres.  During the second quarter we completed two wells in particular that act as bookends to our acreage position.  The Peterson 1H-2821X located in Blaine County, Oklahoma, in the Northwest part of our acreage, had average 30-day gross peak production of 19 MMcfe (54 percent oil, 30 percent gas, 16 percent NGL) and the Sims 1H-2017X located in Canadian County, Oklahoma, in the Southeast part of Cimarex's acreage had average 30-day gross peak production of 12.8 MMcfe (29 percent oil, 46 percent gas, 25 percent NGL). 

 












DAILY PRODUCTION BY REGION
















For the Three Months Ended


For the Six Months Ended





June 30,


June 30,





2016


2015


2016


2015

Permian Basin











Gas (MMcf)



181.2


189.4


177.4


170.0


Oil (Bbls)



35,338


48,448


35,944


45,783


NGL (Bbls)



19,219


19,169


16,639


16,180


Total Equivalent (MMcfe)



508.5


595.1


492.9


541.8












Mid-Continent











Gas (MMcf)



279.1


270.2


288.7


278.6


Oil (Bbls)



8,933


7,181


9,093


7,308


NGL (Bbls)



21,716


17,633


22,432


18,194


Total Equivalent (MMcfe)



463.0


419.1


477.9


431.6












Total Company











Gas (MMcf)



461.9


466.3


467.4


456.1


Oil (Bbls)



44,424


56,261


45,267


53,765


NGL (Bbls)



40,961


37,070


39,112


34,670


Total Equivalent (MMcfe)



974.2


1,026.2


973.7


986.7













































AVERAGE REALIZED PRICE BY REGION
















For the Three Months Ended


For the Six Months Ended





June 30,


June 30,





2016


2015


2016


2015

Permian Basin











Gas ($ per Mcf)



1.88


2.50


1.92


2.61


Oil ($ per Bbl)



40.26


50.69


34.14


46.85


NGL ($ per Bbl)



11.94


12.88


10.25


13.13












Mid-Continent











Gas ($ per Mcf)



1.79


2.51


1.85


2.64


Oil ($ per Bbl)



39.28


49.98


33.07


46.06


NGL ($ per Bbl)



15.70


16.60


13.27


16.94












Total Company











Gas ($ per Mcf)



1.82


2.51


1.87


2.63


Oil ($ per Bbl)



40.07


50.66


33.94


46.79


NGL ($ per Bbl)



13.93


14.67


11.98


15.15












 

Other









The following table summarizes the company's current open hedge positions:









Gas:


3Q16

4Q16

1Q17

2Q17

3Q17

Total

PEPL Collars (3)








Volume (MMBtu/d)


60,000

60,000

50,000

50,000

30,000

50,000

 Wtd Avg Floor 


$    2.28

$         2.28

$    2.20

$    2.20

$   2.25

$   2.25

 Wtd Avg Ceiling 


$    2.82

$         2.82

$    2.82

$    2.82

$   2.90

$   2.83









El Paso Perm Collars (3)








Volume (MMBtu/d)


50,000

50,000

50,000

50,000

20,000

43,961

 Wtd Avg Floor 


$    2.37

$         2.37

$    2.37

$    2.37

$   2.30

$   2.36

 Wtd Avg Ceiling 


$    2.89

$         2.89

$    2.95

$    2.95

$   2.93

$   2.92









Total Natural Gas Collars








Volume (MMBtu/d)


110,000

110,000

100,000

100,000

50,000

93,961









Oil:








WTI Three-Way Collars (4)








Volume (Bbl/d)


3,000

3,000

-

-

-

1,208

 Floor sold (put)  


$   40.00

$       40.00

$        -

$        -

$      -

$ 40.00

 Floor purchased (put)  


$   50.00

$       50.00

$        -

$        -

$      -

$ 50.00

 Ceiling sold (call)  


$   60.00

$       60.00

-

-

-

$ 60.00









WTI  Collars (4)








Volume (Bbl/d)


9,000

9,000

9,000

9,000

5,000

8,195

 Wtd Avg Floor 


$   39.17

$       39.17

$   39.17

$   39.17

$ 42.50

$ 39.58

 Wtd Avg Ceiling 


$   47.92

$       47.92

$   47.92

$   47.92

$ 52.26

$ 48.45









Total Crude Oil Collars








Volume (Bbl/d)


12,000

12,000

9,000

9,000

5,000

9,403

Conference call and webcast

Cimarex will host a conference call Thursday, August 4, at 11:00 a.m. EDT. The call will be webcast and accessible on the company's website at www.cimarex.com. To participate in the live, interactive call, please dial 866-367-3053 five minutes before the scheduled start time (international callers dial 1-412-902-4216).  The replay will be available on the Cimarex website or via the Cimarex App.

Investor Presentation

For more details on Cimarex's second quarter 2016 results, please refer to the company's investor presentation available at 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 press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the company is providing a revised "2016 Outlook", which contains projections for certain 2016 operational and financial metrics.  These forward-looking statements are based on management's judgment as of the date of this press release and include certain risks and uncertainties.  Please refer to the company's Annual Report on Form 10-K for the year ended December 31, 2015, filed with the SEC, and other filings including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, for a list of certain risk factors that may affect these forward-looking statements.

Actual results may differ materially from company projections and other forward-looking statements and can be affected by a variety of factors outside the control of the company including, among other things: oil, NGL and natural gas price volatility; declines in the values of our oil and gas properties resulting in impairments; costs and availability of third party facilities for gathering, processing, refining and transportation; the potential for production decline rates to be greater than expected; performance of acquired properties and newly drilled wells; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to air quality, produced water disposal and hydraulic fracturing; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; higher than expected costs and expenses, including the availability and cost of services and materials; unexpected future capital expenditures; economic and competitive conditions; the ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in one major geographic area; the success of the company's risk management activities; title to properties; litigation; environmental liabilities; the ability to complete property sales or other transactions; and other factors discussed in the company's reports filed with the SEC. Cimarex Energy Co. encourages readers to consider the risks and uncertainties associated with projections and other forward-looking statements. In addition, the company assumes no obligation to publicly revise or update any forward-looking statements based on future events or circumstances.

_______________________________

(1)

Adjusted net income (loss) and adjusted cash flow from operations are non-GAAP financial measures.  See below for a reconciliation of the related amounts.



(2)

Reconciliation of debt to total capitalization, which is a non-GAAP measure, is:  long-term debt of $1.5 billion divided by long-term debt of $1.5 billion plus stockholders' equity of $2.3 billion. Management believes this non-GAAP measure is useful information as it is a common statistic used in the investment community to assist with analysis of the financial condition of an entity.



(3)

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index.



(4)

WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

 




























RECONCILIATION OF ADJUSTED NET INCOME (LOSS) AND ADJUSTED EARNINGS (LOSS) PER SHARE















The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings (loss) per share (non-GAAP) for the periods indicated.




For the Three Months Ended

June 30,



For the ThreeSix Ended

June 30,




2016



2015



2016



2015




(in thousands, net of tax, except per share data)














Net income (loss)

$

(270,290)


$

(600,215)


$

(456,421)


$

(1,015,156)


Impairment of oil and gas properties


399,194



967,287



629,326



1,570,886


Mark-to-market loss on open derivative positions


37,095





41,735




Tax impact


(159,011)



(352,673)



(244,602)



(573,047)

Adjusted net income (loss)

$

6,988


$

14,399


$

(29,962)


$

(17,317)

Diluted earnings (loss) per share*

$

(2.91)


$

(6.47)


$

(4.91)


$

(10.94)

Adjusted diluted earnings (loss) per share*

$

0.07


$

0.15


$

(0.33)


$

(0.19)















Adjusted net income (loss) and adjusted diluted earnings (loss) per share excludes the noted items because management believes these items affect the comparability of operating results. The company discloses these non-GAAP financial measures as a useful adjunct to GAAP earnings because:



a)

Management uses adjusted net income (loss) to evaluate the company's operational trends and performance relative to other oil and gas exploration and production companies.














b)

Adjusted net income (loss) is more comparable to earnings estimates provided by research analysts.














*

Earnings (loss) per share are based on actual figures rather than the rounded figures presented














 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS














The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net cash provided by operating activities to adjusted cash flows from operations (non-GAAP) for the periods indicated.




For the Three Months Ended



For the Six Months Ended




June 30,



June 30,




2016



2015



2016



2015




(in thousands)

Net cash provided by operating activities

$

128,644


$

257,372


$

213,704


$

370,545


Change in operating assets and liabilities


18,220



(5,014)



14,751



68,758

Adjusted cash flow from operations

$

146,864


$

252,358


$

228,455


$

439,303















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 and dividends, 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.



OIL AND GAS CAPITALIZED EXPENDITURES 















For the Three Months Ended



For the Six Months Ended



June 30,



June 30,



2016



2015



2016



2015



(in thousands)

Acquisitions:












Proved

$


$


$

3,324


$

Unproved




160



10,568



2,029

Net purchase price adjustments (*)


34



(12,035)



(2,928)



(12,005)



34



(11,875)



10,964



(9,976)













Exploration and development:












Land and Seismic


17,474



5,275



28,636



27,965

Exploration and development


138,686



184,999



285,708



470,526



156,160



190,274



314,344



498,491













Sale proceeds:












Proved




(1,129)



(12,500)



(2,399)

Unproved


(16)



(6,211)



(16)



(6,211)

Net purchase price adjustments (*)


357



(31)



(114)



94



341



(7,371)



(12,630)



(8,516)














$

156,535


$

171,028


$

312,678


$

479,999














*

The net purchase price adjustments relate to activity in prior periods.

 


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(unaudited)



For the Three Months Ended



For the Six Months Ended


June 30,



June 30,


2016



2015



2016



2015












                                             (in thousands, except per share data)



















Revenues:















Oil sales



$

162,005


$

259,344


$

279,578


$

455,349


Gas sales




76,615



106,374



159,223



217,336


NGL sales




51,939



49,477



85,291



95,077


Gas gathering and other, net


8,314



9,088



15,381



17,523









298,873



424,283



539,473



785,285

Costs and expenses:













Impairment of oil and gas properties

399,194



967,287



629,326



1,570,886


Depreciation, depletion, amortization and accretion

125,627



219,493



256,024



438,007


Production



57,213



70,600



127,915



152,811


Transportation, processing, and other operating

44,436



43,713



90,879



83,355


Gas gathering and other


7,492



11,306



15,572



20,170


Taxes other than income


14,066



25,980



27,905



47,961


General and administrative


21,424



14,054



35,321



29,992


Stock compensation


7,490



4,988



13,018



10,143


(Gain) loss on derivative instruments, net

33,236





32,808




Other operating, net


24



260



114



784









710,202



1,357,681



1,228,882



2,354,109



















Operating income (loss)


(411,329)



(933,398)



(689,409)



(1,568,824)



















Other (income) and expense:













Interest expense 


19,922



20,186



39,817



40,323


Amortization of deferred financing costs

902



1,111



1,812



2,230


Capitalized interest


(5,633)



(8,570)



(10,537)



(17,987)


Other, net




(2,011)



(3,854)



(3,661)



(7,439)



















Income (loss) before income tax


(424,509)



(942,271)



(716,840)



(1,585,951)

Income tax expense (benefit)


(154,219)



(342,056)



(260,419)



(570,795)



















Net income (loss)

$

(270,290)


$

(600,215)


$

(456,421)


$

(1,015,156)



















Earnings (loss) per share to common stockholders:




























Basic 




$

(2.91)


$

(6.47)


$

(4.91)


$

(10.94)


Diluted




$

(2.91)


$

(6.47)


$

(4.91)


$

(10.94)



















Dividends per share

$

0.08


$

0.16


$

0.16


$

0.32



















Shares attributable to common stockholders:











Unrestricted common shares outstanding


93,075



92,831



93,075



92,831


Diluted common shares


93,075



92,831



93,075



92,831



















Shares attributable to common stockholders and participating securities:













Basic shares outstanding


N/A*



N/A*



N/A*



N/A*


Fully diluted shares 


N/A*



N/A*



N/A*



N/A*



















Comprehensive income (loss):













Net income (loss)

$

(270,290)


$

(600,215)


$

(456,421)


$

(1,015,156)


Other comprehensive income (loss):












Change in fair value of investments, net of tax 


195



(292)



280



(190)


Total comprehensive income (loss)

$

(270,095)


$

(600,507)


$

(456,141)


$

(1,015,346)



*

Due to the net loss in the periods ended June 30, 2016 and 2015, shares of 94,996 and 94,465, respectively, which include participating securities, are not considered in the loss per share calculations.

 

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)



For the Three Months Ended



For the Six Months Ended


June 30,



June 30,



2016



2015



2016



2015

(in thousands)


















Cash flows from operating activities:












Net income (loss)

$(270,290)



$(600,215)



$(456,421)



$(1,015,156)


Adjustment to reconcile net income (loss) to net cash













provided by operating activities:














Impairment of oil and gas properties

399,194



967,287



629,326



1,570,886




Depreciation, depletion, amortization and accretion

125,627



219,493



256,024



438,007




Deferred income taxes

(154,219)



(342,056)



(260,419)



(570,795)




Stock compensation

7,490



4,988



13,018



10,143




(Gain) loss on derivative instruments

33,236





32,808






Settlements on derivative instruments

3,859





8,927






Changes in non-current assets and liabilities

685



1,896



2,548



2,942




Amortization of deferred financing costs















and other, net

1,282



965



2,644



3,276


Changes in operating assets and liabilities:














Receivables, net

(37,474)



20,076



(4,327)



92,473




Other current assets

5,346



6,227



17,328



16,121




Accounts payable and other current liabilities

13,908



(21,289)



(27,752)



(177,352)






Net cash provided by operating activities

128,644



257,372



213,704



370,545

Cash flows from investing activities:












Oil and gas expenditures

(148,663)



(228,116)



(325,058)



(599,222)


Sales of oil and gas assets and other assets

(205)



8,053



12,854



9,233


Other capital expenditures

(8,297)



(17,034)



(17,774)



(35,882)






Net cash used by investing activities

(157,165)



(237,097)



(329,978)



(625,871)

Cash flows from financing activities:












Proceeds from sale of common stock



 

752,100





752,100


Financing and underwriting fees



(22,563)



(1)



(22,563)


Dividends paid



(7,551)



(14,182)



(22,655)



(28,129)


Proceeds from exercise of stock options and other

1,172



318



1,287



4,936






Net cash provided by (used in) financing activities

(6,379)



715,673



(21,369)



706,344

Net change in cash and cash equivalents

(34,900)



735,948



(137,643)



451,018

Cash and cash equivalents at beginning of period

676,639



120,932



779,382



405,862

Cash and cash equivalents at end of period

$641,739



$856,880



$641,739



$856,880

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)








June 30,


December 31,


2016


2015

Assets


(in thousands, except share data)

Current assets:








Cash and cash equivalents

$

641,739


$

779,382


Receivables, net


229,634



225,398


Oil and gas well equipment and supplies


37,852



54,579


Derivative instruments


1,119



10,745


Other current assets


7,263



7,826



Total current assets


917,607



1,077,930

Oil and gas properties at cost, using the full cost method of accounting:







Proved properties


15,845,260



15,546,948


Unproved properties and properties under development,








not being amortized


458,530



440,166









16,303,790



15,987,114


Less – accumulated depreciation, depletion, amortization and impairment


(13,569,032)



(12,710,968)



Net oil and gas properties


2,734,758



3,276,146

Fixed assets, net


224,056



230,009

Goodwill





620,232



620,232

Derivative instruments




501

Other assets, net


35,170



38,468








$

4,531,823


$

5,243,286

Liabilities and Stockholders' Equity






Current liabilities:







Accounts payable

$

55,564


$

66,815


Accrued liabilities


220,154



247,508


Derivative instruments


28,399




Revenue payable


99,209



95,744



Total current liabilities


403,326



410,067

Long-term debt:








Principal




1,500,000



1,500,000


Less – unamortized debt issuance costs


(13,205)



(14,380)



Long-term debt, net


1,486,795



1,485,620

Deferred income taxes


92,446



352,705

Other liabilities 



202,454



197,216



Total liabilities


2,185,021



2,445,608

Commitments and contingencies






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,








94,986,852 and 94,820,570 shares issued, respectively


950



948


Paid-in capital


2,775,805



2,762,976


Retained earnings (Accumulated deficit)


(430,674)



33,313


Accumulated other comprehensive income


721



441



Total shareholders' equity


2,346,802



2,797,678








$

4,531,823


$

5,243,286

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cimarex-reports-second-quarter-2016-results-300308816.html

SOURCE Cimarex Energy Co.


Source: PR Newswire (August 3, 2016 - 5:05 PM EDT)

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