Cimarex Energy (XEC)

[dan_s]

I have updated the XEC forecast model and it will soon be on the EPG website.

My valuation for XEC is now $122.50/share, compared to First Call's price target of $111.59.

This week, I've started the process of extending the forecast models another year and breaking out 2016 by quarter.

My WTI oil price assumptions are:
$30/bbl for Q1 2016
$35/bbl for Q2 2016
$40/bbl for Q3 2016
$50/bbl for Q4 2016 < Compares to Raymond James forecast of $50/bbl average for the year with $70/bbl by year-end.
$60/bbl for 2017

For natural gas, I am assuming $2.00 at the beginning of the year and ramping to $2.50 by year-end. $2.70 for 2017.
For NGL's I use my best SWAG for each company based on what they sold it for in 2015.
Keep in mind that natural gas and NGLs trade on regional markets. I do think there is significant upside for gas and NGLs this year since U.S. production is on steady decline and demand goes up year-after-year. The U.S. natural gas market will be 4 to 6 Bcf per day tighter heading into next winter.

In each forecast model, I take into consideration the company's hedges and regional price differences. < Very important step.

All of the forecast models are macro driven Excel spreadsheets. This means you can download them from the EPG website to Excel and change the commodity prices in the forecast periods to see how it will impact earnings, cash flows and the stock price valuations. My goal at EPG is to give you the tools to make better investment decisions on your own. Taking the time to understand the forecast models is the first step.

[dan_s]

From Stifel this morning (2/11):

Top-Tier Assets and Balance Sheet Positions XEC Favorably to Weather the Storm; Reiterate Buy on Top Pick < Stifel's target price is $110

"On XEC's upcoming 4Q15 call, we expect management to announce a FY16 capital budget of $850 million (down 15%
y/y) and FY16 production growth of 3% y/y (down from 14% y/y growth in 2015). Taking into account the company's strong
balance sheet (2016-2017 outspend to be funded with cash-on-hand plus cash flow), an asset portfolio that continues to
clear hurdle rates at strip prices and upside to our risked NAV, we reiterate our Buy rating."

XEC is currently running 11 rigs, with six targeting the Permian Basin Wolfcamp (five in Culberson, one in Reeves) and five in Oklahoma. The company is moving toward development mode in the Wolfcamp (Culberson and Reeves), is in full development mode in Cana, and is actively testing the Meramec (the STACK).