Cimarex Energy (XEC) Update - May 21

[dan_s]

As I write this, XEC is trading at $99.16/share.

Since the company announced Q1 results and updated guidance on May 8, three respected Wall Street firms have sent new forecast/valuation models to Reuters/First Call.
Their valuations are $129, $138 and $186. The primary difference is the oil price being used by each firm. None of them are using $70/bbl WTI for future periods.

My valuation is $162/share based on $65/bbl WTI for all future periods. I am using HH gas prices of $2.75/MMBtu for 2018 and $2.50/MMBtu for 2019. Cimarex produces a lot of NGLs (25% of Q1 production). I believe that I am using conservative NGL price assumptions in my forecast models for NGLs.

XEC's production growth YOY s/b 14% to 16% in both 2018 and 2019. It is just ramping up in STACK, where I think it has a lot of upside.

[dan_s]

I know that some of you are concerned about the takeaway capacity for oil in the Permian Basin. Like most "FEARs" the concerns are over-blown.

Assuming all of Cimarex's Permian Basin oil sells at a $20/bbl discount to WTI through mid-2019 (highly unlikely), my valuation would still be $145/share.

Learn to use the forecast/valuation models on the EPG website for what they are intended. Download one of the Sweet 16 forecast models to Excel and change the commodity prices for future periods at the bottom of the spreadsheet. The Excel spreadsheets are "macro-driven", so they magically update revenues, EPS, CFPS and stock valuations when you change the future period assumptions at the bottom.