XEC - a former S-16 member worth a look

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dan_s
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Joined: Fri Apr 23, 2010 8:22 am

XEC - a former S-16 member worth a look

Post by dan_s »

Cimarex Energy (NYSE: XEC) comfortably exceeded expectations for first-quarter earnings with adjusted net income of $2 per share. This company is firing on all cylinders, crushing its own internal production guidance with 584.5 MMcfe per day. Pushing full-year targets to the upside, Cimarex now expects to sustain average daily production near current levels, to achieve 570 to 595 MMcfe per day. Thanks to effective exploration on the Gulf Coast, and continued success at the attractive Cana-Woodford play, Cimarex posted a 25% sequential surge in production, from 467.6 MMcfe per day in the fourth quarter of 2009.

By all measures, Cimarex is on a roll. At a time when gas-heavy producers like Chesapeake are feeling the pain from weak gas prices, Cimarex turned in a product mix skewing more heavily toward far more profitable oil and natural gas liquids (NGLs). Some of that success relates to a strong liquids component in the granite wash plays, where fellow operator Newfield Exploration (NYSE: NFX) has reported flows as high as 1,000 barrels of NGLs per day.

Closing out 2009 with a bang, Cimarex replaced 185% of 2009 production with the addition of 312Bcfe in proven reserves. Importantly, a full 77% of those added reserves came from proved developed producing reserves (PDPs) ... which provide a significantly more reliable gauge of productive potential than proved undeveloped reserves (PUDs). This will help to sustain Cimarex's impressively reliable reserve base, compared to other operators with more to prove. Finally, Cimarex continues to clean up its balance sheet, with a welcome $60 million surge in cash reserves underscoring a reduced 14% debt-to-total capitalization ratio.
Dan Steffens
Energy Prospectus Group
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