Cimarex Reports First Quarter 2018 Results
Cimarex Reports First Quarter 2018 Results
DENVER, May 8, 2018 /PRNewswire/ --
-- Daily production averaged 206.1 MBOE; oil production up 25% Y-O-Y
-- Sales Agreements in place for bulk of Permian gas production
-- Robust Avalon well results in Lea County
-- Full-year 2018 production and capital guidance unchanged
Cimarex Energy Co. (NYSE: XEC) today reported first quarter 2018 net income of $186.3 million, or $1.96 per share, compared to $131.0 million, or $1.38 per share, in the same period a year ago. First quarter adjusted net income (non-GAAP) was $173.6 million, or $1.82 per share, compared to first quarter 2017 adjusted net income (non-GAAP) of $99.7 million, or $1.05 per share.(1) Net cash provided by operating activities was $383.1 million in the first quarter of 2018 compared to $249.5 million in the same period a year ago. Adjusted cash flow from operations (non-GAAP) was $367.2 million in the first quarter of 2018 compared to $265.8 million in the first quarter a year ago(1).
Total company production for the quarter came in at the high end of guidance, averaging 206.1 thousand barrels of oil equivalent (MBOE) per day. Oil production averaged 65,212 barrels per day, up six percent from fourth quarter 2017 levels.
Realized oil prices averaged $59.93 per barrel, up 26 percent from the $47.71 per barrel received in the first quarter of 2017. Realized natural gas prices averaged $2.28 per thousand cubic feet (Mcf) down 24 percent from the first quarter 2017 average of $3.01 per Mcf. NGL prices were down 1 percent and averaged $20.19 per barrel from the $20.40 per barrel received in the same period of 2017. Realized prices for 2018 reflect the adoption of Accounting Standards Codification 606 (ASC 606). See table below (Impact of ASC 606) for comparison of realized prices for 2018 for pre- and post ASC 606.
Natural gas prices were negatively impacted by increased local price differentials. In addition, gas takeaway in the Permian Basin between now and when planned additional pipeline capacity is expected to be operational (second half of 2019) has raised concerns about the ability of operators to move gas out of the basin. Cimarex has taken a number of steps to ensure the flow of our natural gas production out of the Permian Basin. We have agreed to terms for the sale of more than 98 percent of our projected Permian Basin natural gas production through October 2019.
Cimarex invested $313 million in exploration and development (E&D) during the first quarter, of which $264 million is attributable to drilling and completion activities. First quarter investments were funded with cash flow from operations. Total debt at March 31, 2018 consisted of $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $464 million. Debt was 35 percent of total capitalization(2).
2018 Outlook
Second quarter 2018 production volumes are expected to average 200 - 209 MBOE per day. Total daily production volumes for full year 2018 remain unchanged at 211 - 221 MBOE per day. Full-year estimated exploration and development capital investment remains unchanged at $1.6 - 1.7 billion.
Expenses per BOE of production for the remainder of 2018 are estimated to be:
Production expense $3.80 - 4.30
Transportation, processing and other
expense* 2.40 - 3.00
DD&A and ARO accretion 7.50 - 8.10
General and administrative expense 1.20 - 1.50
Taxes other than income (% of oil and
gas revenue) 5.75 - 6.25%
*Reflects adoption of
ASC 606 (see Impact
of ASC6 table below).
Operations Update
Cimarex invested $313 million in E&D during the first quarter, 61 percent in the Permian Basin and 38 percent in the Mid-Continent. Cimarex brought 54 gross (15 net) wells on production during the quarter. At March 31, 125 gross (48 net) wells were waiting on completion. Cimarex currently is operating 13 drilling rigs.
WELLS BROUGHT ON PRODUCTION BY REGION
Three Months Ended
March 31,
2018 2017
---- ----
Gross wells
Permian Basin 17 25
Mid-Continent 37 45
--- ---
54 70
Net wells
Permian Basin 9 16
Mid-Continent 6 10
--- ---
15 26
Permian Region
Production from the Permian region averaged 114,218 BOE per day in the first quarter, a 19 percent increase from first quarter 2017. Oil volumes averaged 49,845 barrels per day, representing 44 percent of the region's total equivalent production, and a 21 percent increase from first quarter 2017. Total production increased two percent sequentially, with oil production up five percent.
Cimarex completed 17 gross (9 net) wells in the Permian region during the first quarter. There were 52 gross (28 net) wells waiting on completion at March 31.
Activity in the region for the quarter included nine wells completed in the Wolfcamp, Avalon and Bone Spring formations. Of note, in Lea County, New Mexico, two Avalon wells were brought on-line during the first quarter. The Coriander AOC 1-12 State 1H, a 10,000-foot lateral, had an average peak 30-day initial production rate of 3,333 BOE (2,233 barrel of oil) per day and the Thyme APY FED 19H, 5,000-foot lateral, had an average peak 30-day initial production rate of 2,059 BOE (1,420 barrels of oil) per day.
Cimarex currently is operating ten drilling rigs and three completion crews in the region.
Mid-Continent Region
Production from the Mid-Continent averaged 91,433 BOE per day for the first quarter, up 13 percent versus first quarter 2017 and up four percent sequentially.
During the first quarter, Cimarex completed 37 gross (6 net) wells in the Mid-Continent region. At the end of the quarter, 73 gross (20 net) wells were waiting on completion. Cimarex currently is operating three drilling rigs and two completion crews in the region.
Production by Region
Cimarex's average daily production and commodity price by region is summarized below:
DAILY PRODUCTION BY REGION
Three Months Ended
March 31,
2018 2017
---- ----
Permian Basin
Gas (MMcf) 237.9 200.9
Oil (Bbls) 49,845 41,039
NGL (Bbls) 24,725 21,624
Total Equivalent (BOE) 114,218 96,140
Mid-Continent
Gas (MMcf) 295.5 285.0
Oil (Bbls) 15,225 11,053
NGL (Bbls) 26,959 22,151
Total Equivalent (BOE) 91,433 80,697
Total Company
Gas (MMcf) 534.7 487.2
Oil (Bbls) 65,212 52,181
NGL (Bbls) 51,719 43,804
Total Equivalent (BOE) 206,050 177,190
AVERAGE REALIZED PRICE BY REGION
Three Months Ended
March 31,
2018* 2017
---- ----
Permian Basin
Gas ($ per Mcf) 2.23 2.89
Oil ($ per Bbl) 59.75 47.95
NGL ($ per Bbl) 20.76 18.22
Mid-Continent
Gas ($ per Mcf) 2.31 3.09
Oil ($ per Bbl) 60.53 46.81
NGL ($ per Bbl) 19.67 22.53
Total Company
Gas ($ per Mcf) 2.28 3.01
Oil ($ per Bbl) 59.93 47.71
NGL ($ per Bbl) 20.19 20.40
*Realized prices for 2018 reflect
the adoption of ASC 606. See
"Impact of ASC 606" table for a
comparison of 2018 realized prices
on a pre- and post-ASC 606
basis.
Other
The following table summarizes the company's current open hedge positions:
2Q18 3Q18 4Q18 1Q19 2Q19 3Q19
---- ---- ---- ---- ---- ----
Gas Collars: PEPL(3)
------
Volume (MMBtu/d) 130,000 100,000 70,000 60,000 60,000 30,000
Wtd Avg Floor 2.35 2.28 2.21 2.17 2.17 1.93
Wtd Avg Ceiling 2.66 2.52 2.46 2.42 2.42 2.18
El Paso Perm(3)
--------------
Volume (MMBtu/d) 100,000 80,000 60,000 50,000 50,000 30,000
Wtd Avg Floor 2.15 2.06 1.97 1.88 1.88 1.60
Wtd Avg Ceiling 2.43 2.28 2.19 2.12 2.12 1.87
Oil Collars: WTI(4)
-----
Volume (Bbl/d) 31,000 27,000 21,000 15,000 15,000 8,000
Wtd Avg Floor 47.97 47.67 48.76 49.07 49.07 50.00
Wtd Avg Ceiling 58.35 58.25 59.33 61.49 61.49 66.21
Oil Basis Swaps: WTI Midland(5)
-------------
Volume (Bbl/d) 15,000 21,000 16,000 13,000 13,000 8,000
Weighted Avg Differential(6) (0.78) (1.94) (2.25) (2.60) (2.60) (3.93)
Conference call and webcast
Cimarex will host a conference call tomorrow, May 9, at 11:00 a.m. EDT (9:00 a.m. MT). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To join the live, interactive call, please dial 866-367-3053 ten minutes before the scheduled start time (callers in Canada dial 855-669-9657 and international callers dial 412-902-4216).
A replay will be available on the company's website.
Investor Presentation
For more details on Cimarex's first quarter 2018 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 "2018 Outlook" contains projections for certain 2018 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, 2017, 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 levels and volatility; higher than expected costs and expenses, including the availability and cost of services and materials; compliance with environmental and other regulations; risks associated with operating in one major geographic area; environmental liabilities; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; declines in the values of our oil and gas properties resulting in impairments; the potential for production decline rates to be greater than expected; performance of acquired properties and newly drilled wells; costs and availability of third party facilities for gathering, processing, refining and transportation; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions and disposal of produced water; unexpected future capital expenditures; economic and competitive conditions; the availability and cost of capital; 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; derivative and hedging activities; the success of the company's risk management activities; title to properties; litigation; the ability to complete property sales or other transactions; the effectiveness of controls over financial reporting; 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 and adjusted
cash flow from operations are non-
GAAP financial measures. See
below for reconciliations of the
related GAAP amounts.
2 Debt to total capitalization is
calculated by dividing long-term
debt by long-term debt plus
stockholders' equity.
3 PEPL refers to Panhandle Eastern
Pipe Line Tex/OK Mid-Continent
index and El Paso Perm is El Paso
Permian Basin index both as quoted
in Platt's Inside FERC.
4 WTI refers to West Texas
Intermediate oil price as quoted
on the New York Mercantile
Exchange.
5 Index price on basis swaps is WTI
Midland as quoted by Argus
Americas Crude.
6 Index price on basis swaps is WTI
NYMEX less the weighted average
differential shown in table.
RECONCILIATION OF ADJUSTED NET INCOME
The following reconciles net income as reported under generally accepted accounting principles (GAAP) to adjusted net income (non-GAAP) for the periods indicated.
Three Months Ended
March 31,
2018 2017
---- ----
(in thousands, except per share data)
Net income $186,318 $130,972
Mark-to-market
gain on open
derivative
positions (16,548) (49,921)
Tax impact 3,872 18,671
----- ------
Adjusted net
income $173,642 $99,722
======== =======
Diluted earnings
per share $1.96 $1.38
===== =====
Adjusted diluted
earnings per
share* $1.82 $1.05
===== =====
Weighted-average
number of shares
outstanding:
Adjusted
diluted** 95,475 95,166
====== ======
Adjusted net income and adjusted diluted earnings per share exclude 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 measures because:
a) Management uses adjusted net income to evaluate the company's operating performance between periods and to compare the company's performance to other oil and gas exploration and production companies.
b) Adjusted net income is more comparable to earnings estimates provided by research analysts.
* Does not include adjustments resulting from application of the "two-class method" used to determine earnings per share under GAAP.
** Reflects the weighted-average number of common shares outstanding during the period as adjusted for the dilutive effects of outstanding stock options.
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.
Three Months Ended
March 31,
2018 2017
---- ----
(in thousands)
Net cash provided by
operating activities $383,093 $249,514
Change in operating
assets and liabilities (15,859) 16,320
------- ------
Adjusted cash flow from
operations $367,234 $265,834
======== ========
Management uses the non-GAAP financial measure of adjusted cash flow from operations as a means of measuring our ability to fund our capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of net cash provided by operating activities. Management believes this non-GAAP financial measure provides useful information to investors for the same reason, and that it is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.
IMPACT OF ASC 606
Effective January 1, 2018, Cimarex adopted the provisions of Accounting Standards Codification 606, Revenue from Contracts with Customers ("ASC 606"). Application of ASC 606 has no impact on our net income or cash flows from operations; however, certain costs classified as Transportation, processing, and other operating expenses in the statement of operations under prior accounting standards are now reflected as deductions from revenue under ASC 606. The following tables present certain Pre- and Post-ASC 606 amounts:
REVENUES
Three Months Ended
March 31,
2018 2017
----
Pre-ASC 606 Post-ASC 606 As Reported
Adoption Adoption
-------- --------
(in thousands)
Oil sales $351,723 $351,723 $224,066
Gas sales $112,677 $109,721 $131,945
NGL sales $105,613 $93,997 $80,426
AVERAGE REALIZED PRICE BY REGION
Three Months Ended
March 31,
2018 2017
---- ----
Pre-ASC 606 Post-ASC 606
Adoption Adoption As Reported
------------ ------------- -----------
Permian Basin
Gas ($ per Mcf) 2.33 2.23 2.89
Oil ($ per Bbl) 59.75 59.75 47.95
NGL ($ per Bbl) 23.36 20.76 18.22
Mid-Continent
Gas ($ per Mcf) 2.35 2.31 3.09
Oil ($ per Bbl) 60.53 60.53 46.81
NGL ($ per Bbl) 22.07 19.67 22.53
Total Company
Gas ($ per Mcf) 2.34 2.28 3.01
Oil ($ per Bbl) 59.93 59.93 47.71
NGL ($ per Bbl) 22.69 20.19 20.40
TRANSPORTATION, PROCESSING, AND OTHER OPERATING EXPENSES
Three Months Ended
March 31,
2018 2017
---- ----
Pre-ASC 606 Post-ASC 606 As Reported
Adoption Adoption
-------- --------
(in thousands, except per BOE)
Transportation, processing, and
other operating expenses $59,737 $45,165 $55,023
Per BOE $3.22 $2.44 $3.45
OIL AND GAS CAPITALIZED EXPENDITURES
Three Months Ended
March 31,
2018 2017
---- ----
(in thousands)
Acquisitions:
Proved $62 $5
Unproved 2,159 3,033
----- -----
2,221 3,038
Exploration and development:
Land and seismic $10,097 $77,185
Exploration and development 303,372 228,467
------- -------
313,469 305,652
Sales proceeds:
Proved $(24,964) $65
Unproved (4,860) (4,966)
------ ------
(29,824) (4,901)
$285,866 $303,789
======== ========
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)
Three Months Ended
March 31,
2018 2017
---- ----
(in thousands, except per share
information)
Revenues:
Oil sales $351,723 $224,066
Gas and NGL sales 203,718 212,371
Gas gathering and other 11,693 10,739
------ ------
567,134 447,176
------- -------
Costs and expenses:
Depreciation, depletion,
amortization, and accretion 133,919 97,436
Production 71,271 62,421
Transportation, processing,
and other operating 45,165 55,023
Gas gathering and other 9,823 8,427
Taxes other than income 30,188 21,313
General and administrative 23,321 18,034
Stock compensation 6,730 6,288
Loss (gain) on derivative
instruments, net (4,159) (43,861)
Other operating expense, net 203 616
316,461 225,697
------- -------
Operating income 250,673 221,479
Other (income) and expense:
Interest expense 16,783 21,052
Capitalized interest (4,810) (6,641)
Other, net (4,567) (2,210)
------ ------
Income before income tax 243,267 209,278
Income tax expense 56,949 78,306
Net income $186,318 $130,972
======== ========
Earnings per share to common
stockholders:
Basic $1.96 $1.38
===== =====
Diluted $1.96 $1.38
===== =====
Dividends declared per share $0.16 $0.08
===== =====
Weighted-average number of
shares outstanding:
Basic 93,699 93,389
====== ======
Diluted 93,737 93,428
====== ======
Comprehensive income:
Net income $186,318 $130,972
Other comprehensive income:
Change in fair value of
investments, net of tax (190) 402
Total comprehensive income $186,128 $131,374
======== ========
CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)
Three Months Ended
March 31,
2018 2017
---- ----
(in thousands)
Cash flows from operating
activities:
Net income $186,318 $130,972
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation, depletion,
amortization, and accretion 133,919 97,436
Deferred income taxes 56,949 78,312
Stock compensation 6,730 6,288
Loss (gain) on derivative
instruments, net (4,159) (43,861)
Settlements on derivative
instruments (12,389) (6,060)
Changes in non-current assets and
liabilities (900) 1,019
Other, net 766 1,728
Changes in operating assets and
liabilities:
Accounts receivable 44,722 (44,662)
Other current assets 1,603 (2,965)
Accounts payable and other current
liabilities (30,466) 31,307
Net cash provided by operating
activities 383,093 249,514
------- -------
Cash flows from investing
activities:
Oil and gas capital expenditures (323,455) (311,841)
Sales of oil and gas assets 29,824 4,901
Sales of other assets 432 45
Other capital expenditures (19,056) (8,082)
Net cash used by investing
activities (312,255) (314,977)
-------- --------
Cash flows from financing
activities:
Financing fees - (26)
Dividends paid (7,602) (7,577)
Employee withholding taxes paid
upon the net settlement of equity-
classified stock awards (305) (938)
Proceeds from exercise of stock
options 345 36
Net cash used by financing
activities (7,562) (8,505)
------ ------
Net change in cash and cash
equivalents 63,276 (73,968)
Cash and cash equivalents at
beginning of period 400,534 652,876
Cash and cash equivalents at end of
period $463,810 $578,908
======== ========
CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
March 31, December 31,
2018 2017
---- ----
Assets (in thousands, except share and
per share information)
Current assets:
Cash and cash equivalents $463,810 $400,534
Accounts receivable, net of
allowance 415,248 460,174
Oil and gas well equipment and
supplies 54,223 49,722
Derivative instruments 36,157 15,151
Other current assets 8,552 10,054
Total current assets 977,990 935,635
------- -------
Oil and gas properties at
cost, using the full cost
method of accounting:
Proved properties 17,795,832 17,513,460
Unproved properties and
properties under development,
not being amortized 475,665 476,903
------- -------
18,271,497 17,990,363
Less - accumulated
depreciation, depletion,
amortization, and impairment (14,869,223) (14,748,833)
----------- -----------
Net oil and gas properties 3,402,274 3,241,530
--------- ---------
Fixed assets, net of
accumulated depreciation of
$301,407 and $290,114,
respectively 216,873 210,922
Goodwill 620,232 620,232
Derivative instruments 9,441 2,086
Other assets 33,554 32,234
$5,260,364 $5,042,639
========== ==========
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $100,417 $98,386
Accrued liabilities 309,018 351,849
Derivative instruments 54,168 42,066
Revenue payable 194,695 187,273
Total current liabilities 658,298 679,574
------- -------
Long-term debt:
Principal 1,500,000 1,500,000
Less - unamortized debt
issuance costs and discount (12,670) (13,080)
Long-term debt, net 1,487,330 1,486,920
--------- ---------
Deferred income taxes 158,511 101,618
Derivative instruments 3,980 4,268
Other liabilities 200,652 201,981
Total liabilities 2,508,771 2,474,361
--------- ---------
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, 95,433,321 and
95,437,434 shares issued,
respectively 954 954
Additional paid-in capital 2,761,567 2,764,384
Retained earnings (accumulated
deficit) (12,937) (199,259)
Accumulated other
comprehensive income 2,009 2,199
Total stockholders' equity 2,751,593 2,568,278
--------- ---------
$5,260,364 $5,042,639
========== ==========
CONTACT: Cimarex Energy Co., Karen Acierno, 303-285-4957, www.cimarex.com
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