Cimarex Reports First-Quarter 2011 Net Income of $118.2 Million
DENVER, May 6, 2011 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported first-quarter 2011 net income of $118.2 million, or $1.37 per diluted share. This compares to first-quarter 2010 earnings of $204.4 million, or $2.39 per diluted share.
First-quarter 2011 net income includes an unrealized non-cash loss on derivative instruments associated with 2011 oil and gas hedges of $12.8 million after-tax, or $0.15 per share. First-quarter 2010 results had a $33 million ($0.39 per share) after-tax non-cash gain on derivative instruments.
Oil, gas and natural gas liquids (NGLs) revenue in the first quarter of 2011 totaled $414.0 million, a 4% decrease compared to $432.4 million in the same period of 2010. First-quarter 2011 cash flow from operations was $304.6 million versus $313.2 million a year ago(1).
The decrease in first-quarter 2011 revenues and cash flow is a result of lower gas prices, which were only partially offset by higher oil prices and production. First-quarter 2011 production volumes averaged 590 million cubic feet equivalent (MMcfe) per day, a 1% increase over first-quarter 2010 output of 584.5 MMcfe per day. First-quarter 2011 production volumes were 56% gas, 27% oil and 17% NGLs.
First-quarter 2011 realized oil prices increased 20% to $91.46 per barrel. Gas prices fell 31% to $4.45 per thousand cubic feet (Mcf) as compared to the same period of 2010.
2011 Outlook
Second-quarter 2011 production is projected to range between 580-600 MMcfe/d. Full-year 2011 production is projected to be in the range of 605-635 MMcfe/d.
Full-year 2011 exploration and development (E&D) capital investment is expected to be principally funded from cash flow. At the present time, based on current market prices and service costs, we expect 2011 capital expenditures to range from $1.3-$1.4 billion. "We remain focused on profitable growth and maximizing our return on investment. We have a large inventory of drilling opportunities and limited lease expirations," said F.H. Merelli, Chairman, President and Chief Executive Officer.
Expenses for 2011 are expected to fall within the following ranges:
Expenses ($/Mcfe): |
|||
Production expense |
$1.02 - $1.22 |
||
Transportation expense |
0.22 - 0.27 |
||
DD&A and ARO accretion |
1.65 - 1.80 |
||
General and administrative expense |
0.22 - 0.28 |
||
Taxes other than income (% of oil and gas revenue) |
7.5% - 8.5% |
||
Other
Cimarex's commodity hedge position comprised of natural gas swaps and oil collars remains unchanged as summarized below:
Natural Gas Contracts
Weighted Average |
|||||||||||
Period |
Type |
Volume (2) |
Index(3) |
Swap Price |
|||||||
Apr 11 – Dec 11 |
Swap |
20,000 |
PEPL |
$ |
5.05 |
||||||
Oil Contracts
Weighted Average Price |
|||||||||||||
Period |
Type |
Volume (2) |
Index(3) |
Floor |
Ceiling |
||||||||
Apr 11 – Dec 11 |
Collar |
12,000 |
WTI |
$ |
65.00 |
$ |
105.44 |
||||||
Cimarex accounts for these commodity contracts using the mark-to-market (through income) accounting method. First-quarter 2011 net cash settlements, or realized gain was $2 million, which was offset by $20.2 million of non-cash unrealized mark-to-market losses, for a net loss of $18.2 million.
Long-term debt at March 31, 2011 was $350 million. Debt to total capitalization ratio at quarter-end was 11% (4).
Exploration and Development Activity
Cimarex's drilling activities are conducted within three main areas: Permian Basin, Mid-Continent and Gulf Coast. Permian activity is currently primarily directed to the Delaware Basin of southeast New Mexico and West Texas. Majority of Mid-Continent drilling is in the western Oklahoma Cana-Woodford shale and Texas Panhandle Granite Wash. Gulf Coast operations are currently focused in southeast Texas, near Beaumont.
Cimarex drilled and completed 65 gross (35 net) wells during the first quarter of 2011, investing $337 million on E&D. Of total expenditures, 50% were invested in projects located in the Mid-Continent area; 46% in the Permian Basin; and 4% in the Gulf Coast.
Wells Drilled and Completed by Region |
||||
First Quarter |
||||
2011 |
2010 |
|||
Gross wells |
||||
Permian Basin |
26 |
11 |
||
Mid-Continent |
37 |
22 |
||
Gulf Coast |
2 |
4 |
||
65 |
37 |
|||
Net wells |
||||
Permian Basin |
20 |
9 |
||
Mid-Continent |
13 |
10 |
||
Gulf Coast |
2 |
4 |
||
35 |
23 |
|||
% Gross wells completed as producers |
97% |
92% |
||
At the end of the first quarter, 31 net wells were awaiting completion: 13 Mid-Continent and 18 Permian Basin. Cimarex currently has 24 operated rigs running; 12 in the Permian Basin, 11 in the Mid-Continent, and one in southeast Texas Gulf Coast.
Permian Basin
Cimarex drilled and completed 26 gross (19.7 net) Permian Basin wells during the first quarter, completing 96% as producers. At quarter-end, 23 gross (18.1 net) wells were in the process of being completed or were awaiting completion. Drilling principally occurred in the Delaware Basin of Texas and southeast New Mexico, mainly targeting Bone Spring, Paddock, Abo and Wolf Camp formations.
Recent notable horizontal Bone Spring wells brought on production (30-day gross average) this quarter include the Southern California 29 Federal 17H (100% working interest) at 680 barrels equivalent per day (Boe/d), Southern California 29 Federal 18H (100% working interest) at 667 barrels equivalent per day and the Johnson 33-21 2H (96% working interest) at 470 barrels equivalent per day.
Cimarex is also in the early evaluation of unconventional liquids rich gas plays targeting Wolfcamp, Avalon and Cisco/Canyon shale formations in the Delaware Basin. We have approximately 125,000 net acres prospective for a combination of some or all of these shale formations.
Mid-Continent
Cimarex drilled and completed 37 gross (13.2 net) Mid-Continent wells during the first quarter, completing 100% as producers. At quarter-end, 32 gross (13 net) wells were in the process of being completed or were awaiting completion.
The majority of the first-quarter activity occurred in the Anadarko Basin, Cana-Woodford shale play, where Cimarex drilled and completed 31 gross (9.6 net) wells. At quarter-end 29 gross (11.1 net) wells were being completed or awaiting completion in this area.
Since the Cana play began in late 2007, Cimarex has participated in 212 gross (79.9 net) wells. Of total wells, 172 gross (63.4 net) were on production at quarter-end and the remainder were either in the process of being drilled or awaiting completion. First-quarter 2011 net production from the Cana play averaged 104 MMcfe/d versus the first-quarter 2010 average of 67 MMcfe/d.
Other first-quarter 2011 Mid-Continent drilling included 5 gross (2.8 net) Granite Wash wells. Recent notable 30-day average production from these wells include the George 17-5H (61% working interest) at 8.6 MMcfe/d, George 17-6H (61% working interest) at 8.0 MMcfe/d and the Kephart 1-4H (91% working interest) at 6.5 MMcfe/d.
Gulf Coast
During the first quarter 2011 Cimarex drilled two gross (1.8 net) Yegua/Cook Mountain wells, of which one gross (1.0 net) was successful. One rig is currently drilling near Beaumont.
Production by Region
Cimarex's average daily production by commodity and region is summarized below:
Production by region |
||||
First Quarter |
||||
2011 |
2010 |
|||
Gas (Mcf per day) |
||||
Permian Basin |
68,836 |
73,762 |
||
Mid-Continent |
189,345 |
188,005 |
||
Gulf Coast |
68,141 |
128,065 |
||
Other |
1,302 |
1,000 |
||
327,624 |
390,832 |
|||
NGL (barrels per day) |
||||
Permian Basin |
2,941 |
163 |
||
Mid-Continent |
7,542 |
3,947 |
||
Gulf Coast |
6,463 |
202 |
||
Other |
1 |
1 |
||
16,947 |
4,313 |
|||
Oil (barrels per day) |
||||
Permian Basin |
14,541 |
13,291 |
||
Mid-Continent |
5,237 |
4,519 |
||
Gulf Coast |
6,993 |
10,143 |
||
Other |
17 |
14 |
||
26,788 |
27,967 |
|||
Total Equivalent (Mcfe per day) |
||||
Permian Basin |
173,728 |
154,486 |
||
Mid-Continent |
266,019 |
238,801 |
||
Gulf Coast |
148,877 |
190,135 |
||
Other |
1,410 |
1,093 |
||
590,034 |
584,515 |
|||
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 # 60711411 ten minutes before the scheduled start time. A digital replay will be available for one week following the live broadcast at (800) 642-1687 and by using the conference ID #60711411. 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, Permian Basin and Gulf Coast areas of the U.S.
This communication contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are more fully described in SEC reports filed by Cimarex. While Cimarex makes these forward-looking statements in good faith, management cannot guarantee that anticipated future results will be achieved. Cimarex assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.
(1) Cash flow from operations is a non-GAAP financial measure. See below for a reconciliation of the related amounts. |
|||
(2) Gas volume in MMBtu per day and oil volume in barrels per day. |
|||
(3) PEPL refers to Panhandle Eastern Pipe Line, Tex/Ok Mid-Continent index as quoted in Platt's Inside FERC. WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange. |
|||
(4) Reconciliation of debt to total capitalization, which is a non-GAAP measure, is: long-term debt of $350 million divided by long-term debt of $350 million plus stockholders' equity of $2,722 million. |
|||
RECONCILIATION OF CASH FLOW FROM OPERATIONS |
||||||
For the Three Months Ended |
||||||
March 31, |
||||||
2011 |
2010 |
|||||
(in thousands) |
||||||
Net cash provided by operating activities |
$ |
265,277 |
$ |
299,107 |
||
Change in operating assets |
||||||
and liabilities |
39,343 |
14,100 |
||||
Cash flow from operations |
$ |
304,620 |
$ |
313,207 |
||
Management believes that the non-GAAP measure of cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the company's ability to fund its capital program. It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry. |
|
PRICE AND PRODUCTION DATA* |
||||||
For the Three Months Ended |
||||||
March 31, |
||||||
2011 |
2010 |
|||||
Total gas production - Mcf |
29,486,147 |
35,174,920 |
||||
Gas volume - Mcf per day |
327,624 |
390,832 |
||||
Gas price - per Mcf |
$4.45 |
$6.41 |
||||
Total oil production - barrels |
2,410,919 |
2,517,040 |
||||
Oil volume - barrels per day |
26,788 |
27,967 |
||||
Oil price - per barrel |
$91.46 |
$76.11 |
||||
Total NGL production - barrels |
1,525,226 |
388,202 |
||||
NGL volume - barrels per day |
16,947 |
4,313 |
||||
NGL price - per barrel |
$40.77 |
$39.18 |
||||
* |
During the first quarter of 2010, we began separately reporting NGL volumes, based on where title transfers. Separate reporting of additional NGL's continued throughout the year as new contracts were entered into and others were modified to clarify title transfer. As a consequence, reported gas and NGL volumes and prices between periods may not be comparable. |
|
OIL AND GAS CAPITALIZED EXPENDITURES |
||||||
For the Three Months Ended |
||||||
March 31, |
||||||
2011 |
2010 |
|||||
(in thousands) |
||||||
Acquisitions: |
||||||
Proved |
$ |
— |
$ |
7,156 |
||
Unproved |
441 |
16,497 |
||||
441 |
23,653 |
|||||
Exploration and development: |
||||||
Land and Seismic |
32,426 |
24,450 |
||||
Exploration and development |
304,575 |
167,628 |
||||
337,001 |
192,078 |
|||||
Sale proceeds: |
||||||
Proved** |
(11,354) |
58 |
||||
Unproved |
(494) |
— |
||||
(11,848) |
58 |
|||||
$ |
325,594 |
$ |
215,789 |
|||
** |
The positive amount in the first-quarter 2010 proved sales proceeds reflects purchase price adjustments related to dispositions in 2009. |
|
CONDENSED STATEMENTS OF OPERATIONS (unaudited) |
|||||||
For the Three Months Ended |
|||||||
March 31, |
|||||||
2011 |
2010 |
||||||
(In thousands, except per share data) |
|||||||
Revenues: |
|||||||
Gas sales |
$ |
131,323 |
$ |
225,637 |
|||
Oil sales |
220,499 |
191,560 |
|||||
NGL sales |
62,190 |
15,209 |
|||||
Gas gathering, processing and other, net |
12,584 |
16,164 |
|||||
426,596 |
448,570 |
||||||
Costs and expenses: |
|||||||
Depreciation, depletion, amortization and accretion |
86,964 |
72,354 |
|||||
Production |
58,480 |
41,983 |
|||||
Transportation |
13,446 |
11,167 |
|||||
Gas gathering and processing |
4,551 |
6,505 |
|||||
Taxes other than income |
33,597 |
32,358 |
|||||
General and administrative |
14,727 |
13,045 |
|||||
Stock compensation, net |
4,750 |
2,778 |
|||||
(Gain) loss on derivative instruments, net |
18,244 |
(52,597) |
|||||
Other operating, net |
3,374 |
(1,846) |
|||||
238,133 |
125,747 |
||||||
Operating income |
188,463 |
322,823 |
|||||
Other (income) and expense: |
|||||||
Interest expense |
7,275 |
7,745 |
|||||
Amortization of deferred financing costs |
1,705 |
1,717 |
|||||
Capitalized interest |
(7,225) |
(7,424) |
|||||
Other, net |
(604) |
(1,930) |
|||||
Income before income tax |
187,312 |
322,715 |
|||||
Income tax expense |
69,150 |
118,354 |
|||||
Net income |
$ |
118,162 |
$ |
204,361 |
|||
Earnings per share to common stockholders: |
|||||||
Basic |
$ |
1.38 |
$ |
2.42 |
|||
Diluted |
$ |
1.37 |
$ |
2.39 |
|||
Dividends per share |
$ |
0.10 |
$ |
0.08 |
|||
Shares attributable to common stockholders: |
|||||||
Unrestricted common shares outstanding |
83,546 |
82,023 |
|||||
Diluted common shares |
83,984 |
82,870 |
|||||
Shares attributable to common stockholders and participating securities: |
|||||||
Basic shares outstanding |
85,626 |
84,531 |
|||||
Fully diluted shares |
86,064 |
85,378 |
|||||
CONDENSED CASH FLOW STATEMENTS (unaudited) |
||||||||||
For the Three Months Ended |
||||||||||
March 31, |
||||||||||
2011 |
2010 |
|||||||||
(In thousands) |
||||||||||
Cash flows from operating activities: |
||||||||||
Net income |
$ |
118,162 |
$ |
204,361 |
||||||
Adjustment to reconcile net income to net cash |
||||||||||
provided by operating activities: |
||||||||||
Depreciation, depletion, amortization and accretion |
86,964 |
72,354 |
||||||||
Deferred income taxes |
69,698 |
84,990 |
||||||||
Stock compensation, net |
4,750 |
2,778 |
||||||||
Derivative instruments, net |
20,278 |
(52,056) |
||||||||
Changes in non-current assets and liabilities |
2,738 |
3,101 |
||||||||
Amortization of deferred financing costs |
||||||||||
and other, net |
2,030 |
(2,321) |
||||||||
Changes in operating assets and liabilities: |
||||||||||
(Increase) decrease in receivables, net |
2,022 |
(39,495) |
||||||||
(Increase) decrease in other current assets |
(3,005) |
18,495 |
||||||||
Increase (decrease) in accounts payable and |
||||||||||
accrued liabilities |
(38,360) |
6,900 |
||||||||
Net cash provided by operating activities |
265,277 |
299,107 |
||||||||
Cash flows from investing activities: |
||||||||||
Oil and gas expenditures |
(310,182) |
(203,682) |
||||||||
Sales of oil and gas and other assets |
12,037 |
55 |
||||||||
Other expenditures |
(24,506) |
(7,822) |
||||||||
Net cash used by investing activities |
(322,651) |
(211,449) |
||||||||
Cash flows from financing activities: |
||||||||||
Net decrease in bank debt |
— |
(25,000) |
||||||||
Dividends paid |
(6,849) |
(5,069) |
||||||||
Issuance of common stock and other |
4,243 |
2,409 |
||||||||
Net cash used by financing activities |
(2,606) |
(27,660) |
||||||||
Net change in cash and cash equivalents |
(59,980) |
59,998 |
||||||||
Cash and cash equivalents at beginning of period |
114,126 |
2,544 |
||||||||
Cash and cash equivalents at end of period |
$ |
54,146 |
$ |
62,542 |
||||||
CONDENSED BALANCE SHEETS (unaudited) |
|||||||
March 31, |
December 31, |
||||||
Assets |
2011 |
2010 |
|||||
(In thousands, except share data) |
|||||||
Current assets: |
|||||||
Cash and cash equivalents |
$ |
54,146 |
$ |
114,126 |
|||
Receivables, net |
308,946 |
310,968 |
|||||
Oil and gas well equipment and supplies |
79,599 |
81,871 |
|||||
Deferred income taxes |
9,848 |
4,293 |
|||||
Derivative instruments |
3,975 |
5,731 |
|||||
Other current assets |
49,356 |
44,778 |
|||||
Total current assets |
505,870 |
561,767 |
|||||
Oil and gas properties at cost, using the full cost method of accounting: |
|||||||
Proved properties |
8,698,442 |
8,421,768 |
|||||
Unproved properties and properties under development, |
|||||||
not being amortized |
598,656 |
547,609 |
|||||
9,297,098 |
8,969,377 |
||||||
Less – accumulated depreciation, depletion and amortization |
(6,126,581) |
(6,047,019) |
|||||
Net oil and gas properties |
3,170,517 |
2,922,358 |
|||||
Fixed assets, net |
167,546 |
156,579 |
|||||
Goodwill |
691,432 |
691,432 |
|||||
Other assets, net |
34,406 |
26,111 |
|||||
$ |
4,569,771 |
$ |
4,358,247 |
||||
Liabilities and Stockholders' Equity |
|||||||
Current liabilities: |
|||||||
Accounts payable |
$ |
47,322 |
$ |
47,242 |
|||
Accrued liabilities |
328,271 |
320,989 |
|||||
Derivative instruments |
28,109 |
9,587 |
|||||
Revenue payable |
136,000 |
134,495 |
|||||
Total current liabilities |
539,702 |
512,313 |
|||||
Long-term debt |
350,000 |
350,000 |
|||||
Deferred income taxes |
694,384 |
619,040 |
|||||
Other liabilities |
264,138 |
267,062 |
|||||
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, |
|||||||
85,539,995 and 85,234,721 shares issued, respectively |
855 |
852 |
|||||
Paid-in capital |
1,885,036 |
1,883,065 |
|||||
Retained earnings |
835,233 |
725,651 |
|||||
Accumulated other comprehensive income |
423 |
264 |
|||||
2,721,547 |
2,609,832 |
||||||
$ |
4,569,771 |
$ |
4,358,247 |
||||
SOURCE Cimarex Energy Co.
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