Cimarex Reports First Quarter 2016 Results

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Production Averaged 973 MMcfe per day; Up 3% Year-over-Year

May 4, 2016 5:00 PM UTC

DENVER, May 4, 2016 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported a first quarter 2016 net loss of $186.1 million, or $2.00 per share, primarily the result of a non-cash charge related to the impairment of oil and gas properties.  The adjusted first quarter net loss was $36.9 million, or $0.40 per share(1).  First quarter 2016 adjusted cash flow from operations was $81.6 million versus $186.9 million a year ago(1). 

Total company production averaged 973 million cubic feet equivalent (MMcfe) per day during the first quarter, a three percent increase from first quarter 2015 and a one percent decrease sequentially. As anticipated, curtailments related to third party processing in the Permian Basin and weather negatively impacted first quarter volumes by 30 MMcfe per day. 

Continued weakness in commodity prices impacted Cimarex's financial results for the quarter. Realized oil prices averaged $28.02 per barrel, down 34 percent versus a year ago and 25 percent sequentially.  Realized natural gas prices were down 31 percent from first quarter 2015 and 13 percent sequentially to $1.92 per Mcf. NGL prices averaged $9.84 per barrel, down 37 percent from first quarter 2015 and down 23 percent sequentially.  (See table of Average Realized Price by Region below.)

Cimarex invested $158 million in exploration and development during the first quarter which was funded with cash flow from operations and cash on hand.  Total debt at March 31, 2016, consisted of $1.5 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $677 million. Debt was 36 percent of total capitalization(2). 

2016 Outlook

Cimarex now estimates total production volumes for 2016 to average 940–970 MMcfe per day, a midpoint decrease of three percent over 2015 volumes.  Second quarter output is expected to average 935-965 MMcfe per day. 

Cimarex projects 2016 exploration and development capital of approximately $650-$700 million.  The $50 million increase in capital from prior guidance is primarily related to the completion of a six-section development of Woodford wells previously scheduled for early 2017 that is now anticipated to commence in October 2016.  To a lesser extent, larger completion design, more non-operated activity and carryover drilling capital from 2015 also contributed to the increase.

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

Production expense

$0.80 -   0.90

Transportation, processing and other expense

  0.45  -  0.55

DD&A and ARO accretion*

  1.30  -  1.50

General and administrative expense

  0.19  -  0.23

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

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

   5.5  -  6.0%

Operations Update

Cimarex invested $158 million in exploration and development during the first quarter, 53 percent in the Permian Basin and 46 percent in the Mid-Continent.  We completed 22 gross (5 net) wells during the quarter.  At March 31, 2016, 93 gross (44 net) wells were awaiting completion including 27 net wells associated with multi-well infill and spacing projects that are expected be completed in the second half of 2016.  Cimarex is currently operating nine drilling rigs with a reduction to four rigs planned by the end of the second quarter. 

WELLS BROUGHT ON PRODUCTION BY REGION

For the Three Months Ended

March 31,

2016

2015

Gross wells

Permian Basin

7

42

Mid-Continent

15

11

Other

—

—

22

53

Net wells

Permian Basin

3

30

Mid-Continent

2

3

Other

—

—

5

33

Permian Region

Production from the Permian Basin averaged 477 MMcfe per day in the first quarter, a two percent decrease from first quarter 2015 and eight percent sequentially. Quarterly oil volumes decreased 15 percent year-over-year and five percent sequentially to 36,549 barrels per day and accounted for 46 percent of the region's total production for the quarter. Natural gas production increased 15 percent year-over-year but decreased six percent sequentially.  NGL production was up seven percent over first quarter 2015 and down 19 percent sequentially.

During the first quarter Cimarex completed and brought on production seven gross (three net) wells in the Permian region. There were 25 gross (16 net) wells waiting on completion on March 31. 

Mid-Continent

Production from the Mid-Continent averaged 493 MMcfe per day for the first quarter, an 11 percent increase over first quarter 2015 and seven percent sequentially. Natural gas production grew four percent both year-over-year and sequentially while crude oil volumes were up 24 percent over first quarter 2015 and nine percent sequentially.  NGL volumes increased 23 percent over first quarter 2015 and 13 percent sequentially.

During the first quarter Cimarex completed and brought on production 15 gross (two net) wells in the Mid-Continent. At the end of the quarter, 68 gross (28 net) wells were waiting on completion.

Production by Region

Cimarex's average daily production and commodity price by region are summarized below:

DAILY PRODUCTION BY REGION

For the Three Months Ended

March 31,

2016

2015

Permian Basin

Gas (MMcf)

173.6

150.4

Oil (Bbls)

36,549

43,089

NGL (Bbls)

14,059

13,156

Total Equivalent (MMcfe)

477.3

487.8

Mid-Continent

Gas (MMcf)

298.4

287.0

Oil (Bbls)

9,253

7,436

NGL (Bbls)

23,148

18,762

Total Equivalent (MMcfe)

492.8

444.1

Total Company

Gas (MMcf)

472.9

445.8

Oil (Bbls)

46,110

51,241

NGL (Bbls)

37,263

32,242

Total Equivalent (MMcfe)

973.1

946.7

AVERAGE REALIZED PRICE BY REGION

For the Three Months Ended

March 31,

2016

2015

Permian Basin

Gas ($ per Mcf)

1.96

2.75

Oil ($ per Bbl)

28.22

42.48

NGL ($ per Bbl)

7.93

13.50

Mid-Continent

Gas ($ per Mcf)

1.91

2.75

Oil ($ per Bbl)

27.07

42.23

NGL ($ per Bbl)

10.99

17.26

Total Company

Gas ($ per Mcf)

1.92

2.77

Oil ($ per Bbl)

28.02

42.50

NGL ($ per Bbl)

9.84

15.71

Other

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

Gas:

2Q16

3Q16

4Q16

1Q17

2Q17

Total

PEPL Collars (3)

Volume (MMBtu)

2,730,000

2,760,000

2,760,000

1,800,000

1,820,000

11,870,000

 Wtd Avg Floor 

$       2.32

$       2.32

$       2.32

$       2.13

$       2.13

$         2.26

 Wtd Avg Ceiling 

$       2.75

$       2.75

$       2.75

$       2.70

$       2.70

$         2.73

El Paso Perm Collars (3)

Volume (MMBtu)

3,030,000

2,760,000

2,760,000

2,700,000

2,730,000

13,980,000

 Wtd Avg Floor 

$       2.45

$       2.42

$       2.42

$       2.42

$       2.42

$         2.42

 Wtd Avg Ceiling 

$       2.90

$       2.87

$       2.87

$       2.97

$       2.97

$         2.91

Oil:

WTI Three-Way Collars (4)

Volume (Bbl)

273,000

276,000

276,000

-

-

825,000

 Floor sold (put)  

$     40.00

$     40.00

$     40.00

$          -

$          -

$       40.00

 Floor purchased (put)  

$     50.00

$     50.00

$     50.00

$          -

$          -

$       50.00

 Ceiling sold (call)  

$     60.00

$     60.00

$     60.00

-

-

$       60.00

WTI  Collars (4)

Volume (Bbl)

364,000

368,000

368,000

360,000

364,000

1,824,000

 Wtd Avg Floor 

$     35.00

$     35.00

$     35.00

$     35.00

$     35.00

$       35.00

 Wtd Avg Ceiling 

$     42.50

$     42.50

$     42.50

$     42.50

$     42.50

$       42.50

Conference call and webcast

Cimarex will host a conference call tomorrow, May 5, at 11:00 a.m. EDT (9:00 a.m. MDT). The call will be webcast and accessible on the Cimarex 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 first 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 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; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; 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; 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; 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 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 $2.6 billion.

(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.

 

RECONCILIATION OF ADJUSTED NET INCOME (LOSS)

For the Three Months Ended

March 31,

2016

2015

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

Net income (loss)

$

(186,131)

$

(414,941)

Impairment of oil and gas properties

146,226

383,225

Mark-to-market loss on open derivative positions

2,956

—

Adjusted net income (loss)

$

(36,949)

$

(31,716)

Diluted earnings (loss) per share

$

(2.00)

$

(4.84)

Adjusted diluted earnings (loss) per share

$

(0.40)

$

(0.37)

Diluted shares attributable to common stockholders and participating securities

93,000

*

85,770

*

Estimated tax rates utilized

36.5%

36.5%

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.

*

Participating securities and other dilutive shares are not included in the diluted share computation when a loss exists.

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

For the Three Months Ended

March 31,

2016

2015

(in thousands)

Net cash provided by operating activities

$

85,060

$

113,173

Change in operating assets and liabilities

(3,469)

73,772

Adjusted cash flow from operations

$

81,591

$

186,945

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

March 31,

2016

2015

(in thousands)

Acquisitions:

Proved

$

2,584

$

30

Unproved

8,346

1,869

10,930

1,899

Exploration and development:

Land and Seismic

11,162

22,690

Exploration and development

147,022

285,527

158,184

308,217

Sale proceeds:

Proved

(12,587)

(1,145)

Unproved

(384)

—

(12,971)

(1,145)

$

156,143

$

308,971

 

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

For the Three Months Ended

March 31,

2016

2015

(in thousands, except per share data)

Revenues:

Oil sales

$

117,573

$

196,005

Gas sales

82,608

110,962

NGL sales

33,352

45,600

Gas gathering and other, net

7,067

8,435

240,600

361,002

Costs and expenses:

Impairment of oil and gas properties

230,132

603,599

Depreciation, depletion, amortization and accretion

130,397

218,514

Production

70,702

82,211

Transportation, processing, and other operating

46,443

39,642

Gas gathering and other

8,080

8,864

Taxes other than income

13,839

21,981

General and administrative

13,897

15,938

Stock compensation

5,528

5,155

(Gain) loss on derivative instruments, net

(428)

—

Other operating, net

90

524

518,680

996,428

Operating income (loss)

(278,080)

(635,426)

Other (income) and expense:

Interest expense 

19,895

20,137

Amortization of deferred financing costs

910

1,119

Capitalized interest

(4,904)

(9,417)

Other, net

(1,650)

(3,585)

Income (loss) before income tax

(292,331)

(643,680)

Income tax expense (benefit)

(106,200)

(228,739)

Net income (loss)

$

(186,131)

$

(414,941)

Earnings (loss) per share to common stockholders:

Basic 

$

(2.00)

$

(4.84)

Diluted

$

(2.00)

$

(4.84)

Dividends per share

$

0.08

$

0.16

Shares attributable to common stockholders:

Unrestricted common shares outstanding

93,000

85,770

Diluted common shares

93,000

85,770

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

N/A*

N/A*

Fully diluted shares 

N/A*

N/A*

Comprehensive income (loss):

Net income (loss)

$

(186,131)

$

(414,941)

Other comprehensive income (loss):

Change in fair value of investments, net of tax 

85

101

Total comprehensive income (loss)

$

(186,046)

$

(414,840)

*

Due to the net loss in the periods ended March 31, 2016 and 2015, shares of 94,824 and 87,682, 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

March 31,

2016

2015

(in thousands)

Cash flows from operating activities:

Net income (loss)

$

(186,131)

$

(414,941)

Adjustment to reconcile net income (loss) to net cash

provided by operating activities:

Impairment of oil and gas properties

230,132

603,599

Depreciation, depletion, amortization and accretion

130,397

218,514

Deferred income taxes

(106,200)

(228,739)

Stock compensation

5,528

5,155

(Gain) loss on derivative instruments

(428)

—

Settlements on derivative instruments

5,068

—

Changes in non-current assets and liabilities

1,863

1,046

Amortization of deferred financing costs

and other, net

1,362

2,311

Changes in operating assets and liabilities:

Receivables, net

33,147

72,397

Other current assets

11,982

9,894

Accounts payable and other current liabilities

(41,660)

(156,063)

Net cash provided by operating activities

85,060

113,173

Cash flows from investing activities:

Oil and gas expenditures

(176,395)

(371,106)

Sales of oil and gas assets and other assets

13,059

1,180

Other capital expenditures

(9,477)

(18,848)

Net cash used by investing activities

(172,813)

(388,774)

Cash flows from financing activities:

Dividends paid

(15,104)

(13,947)

Proceeds from exercise of stock options and other

114

4,618

Net cash used in financing activities

(14,990)

(9,329)

Net change in cash and cash equivalents

(102,743)

(284,930)

Cash and cash equivalents at beginning of period

779,382

405,862

Cash and cash equivalents at end of period

$

676,639

$

120,932

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

March 31,

December 31,

2016

2015

Assets

(in thousands, except share data)

Current assets:

Cash and cash equivalents

$

676,639

$

779,382

Receivables, net

192,160

225,398

Oil and gas well equipment and supplies

44,648

54,579

Derivative instruments

11,868

10,745

Other current assets

5,775

7,826

Total current assets

931,090

1,077,930

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

Proved properties

15,677,599

15,546,948

Unproved properties and properties under development,

not being amortized

466,497

440,166

16,144,096

15,987,114

Less – accumulated depreciation, depletion, amortization and impairment

(13,057,470)

(12,710,968)

Net oil and gas properties

3,086,626

3,276,146

Fixed assets, net

227,343

230,009

Goodwill

620,232

620,232

Derivative instruments

422

501

Other assets, net

35,548

38,468

$

4,901,261

$

5,243,286

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

39,241

$

66,815

Accrued liabilities

229,787

247,508

Derivative instruments

3,812

—

Revenue payable

84,252

95,744

Total current liabilities

357,092

410,067

Long-term debt:

Principal

1,500,000

1,500,000

Less – unamortized debt issuance costs

(13,789)

(14,380)

Long-term debt, net

1,486,211

1,485,620

Deferred income taxes

246,553

352,705

Other liabilities 

197,074

197,216

Total liabilities

2,286,930

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,

94,815,010 and 94,820,570 shares issued, respectively

948

948

Paid-in capital

2,773,254

2,762,976

Retained earnings (Accumulated deficit)

(160,397)

33,313

Accumulated other comprehensive income

526

441

2,614,331

2,797,678

$

4,901,261

$

5,243,286

 

To view the original version on PR Newswire, visit:http://www.prnewswire.com/news-releases/cimarex-reports-first-quarter-2016-results-300263067.html

SOURCE Cimarex Energy Co.


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