Cimarex Energy (XEC) Q1 Results - May 6

[dan_s]

Cimarex Energy Co. (NYSE: XEC) reported first-quarter 2021 financial and operating results.
Net income for first-quarter 2021 totaled $128.1 million, or $1.25 per share. Net income for the quarter was impacted by a mark-to-market loss on the Company's commodity derivative positions of $99.4 million. Excluding the impact of the mark-to-market loss on commodity derivatives, adjusted net income (non-GAAP) for first-quarter 2021 was $203.7 million, or $1.98 per share. < Adjusted Net Income compares to my forecast of $200.2 million, $1.94 per share.

Highlights:

Generated cash flow from operating activities of $403 million. Adjusted cash flow from operating activities (non-GAAP) totaled $395 million, exceeding capital expenditures and generating $231 million of free cash flow (non-GAAP). < Compares to my forecast of $398.7 million adjusted cash flow from operations for the quarter. Cimarex is on track to generate $1 Billion of Free Cash Flow From Operations this year.

Long-term debt at quarter end was $2 billion, while net debt (non-GAAP) decreased by approximately $250 million to $1.5 billion at the end of the quarter.

Delivered oil volumes of 68.6 MBopd. < Beat my forecast of 65,000 BOPD.

Outlook & Guidance

Announces strategic non-core asset sales for total cash consideration of approximately $115 million, subject to customary closing and post-closing adjustments.

Continue to expect total capital expenditures for full-year 2021 to range between $650 million and $750 million, which is expected to drive fourth-quarter 2021 oil volume growth of approximately 30% year-over-year. < 67,799 BOPD in Q4 2020 to more than 88,000 BOPD in Q4 2021.

Expect second-quarter 2021 oil production to range between 69 MBopd to 73 MBopd.

Advancing emissions reductions efforts, with a 2021 goal of reducing the Company's GHG emissions intensity by 8% to 12%, which follows a 22% reduction in 2020.

Tom Jorden, Chairman and Chief Executive Officer, commented, "Following a turbulent 2020, the first quarter of 2021 presented new challenges as severe winter weather impacted operations for many producers, including Cimarex. I'm proud of our remarkable team for putting safety first and delivering a strong quarter despite the conditions. Our priority in 2021 is efficiently investing in our assets to deliver strong returns and free cash flow, while also re-setting oil volumes higher following their decline in 2020. We remain on track with our capital budget and exit rate outlook, which positions Cimarex to continue generating substantial free cash flow and increasing returns to shareholders."

[dan_s]

I have updated my forecast/valuation model for XEC. It will be posted to the EPG website this afternoon.

XEC is trading for $68.56 this morning. First Call's price target is $78.89, based on a lot of old valuations in the Reuters database.
Recent updates
$102.00 < Raymond J 5/6/2021
$82.00 < S Williams 5/6/2021
$104.00 < Stifel 4/28/2021

I am increasing my valuation by $18 to $114 per share, primarily because I have dropped 2020 from my valuation formula (it is time to look forward).
Why?
> Cimarex is a free cash flow machine
> They can fund a D&C budget with less than half of their cash flow and generate solid production growth in 2H 2021.
> They provide detailed and conservative guidance, so I have a HIGH LEVEL of confidence in my model.
> Lots of running room and a strong balance sheet makes it a PRIME TAKEOVER TARGET
> It already pays a dividend, which I expect them to increase in 2H 2021
> For a company of this size it has a relatively low share count (less than 103 million shares), so small changes in production and commodity price assumptions does have a significant impact on this stock valuation. For example, if you agree with Goldman Sachs' oil price forecast XEC could go to $150 per share.