Cimarex Q3 Results

[dan_s]

Another very good quarter. Note their strong earnings despite low oil and gas prices in the Permian. By mid 2019 those big differentials in West Texas will go away.

DENVER, Nov. 6, 2018 /PRNewswire/ --

Daily production averaged 218.6 MBOE; oil production averaged 63,909 barrels per day < Compares to my forecast of 217,000 Boepd, 63,000 BOPD.

2018 capital guidance unchanged; targeting mid point

Fourth quarter oil production expected to average 73.0 - 78.0 MBbls per day

Cimarex Energy Co. (XEC) today reported third quarter 2018 net income of $148.4 million, or $1.56 per share, compared to $91.4 million, or $0.96 per share, in the same period a year ago. Third quarter adjusted net income (non-GAAP) was $189.6 million, or $1.99 per share, compared to third quarter 2017 adjusted net income (non-GAAP) of $103.6 million, or $1.09 per share. < Compares to my forecast of $140.7 million , $1.47 EPS.

Net cash provided by operating activities was $453.5 million in the third quarter of 2018 compared to $251.0 million in the same period a year ago. Adjusted cash flow from operations (non-GAAP) was $388.7 million in the third quarter of 2018 compared to $283.9 million in the third quarter a year ago. < Compares to my forecast of $338 million cash flow from operations.

On August 31, Cimarex closed on the previously announced transaction for the sale of its Ward County assets for $544.5 million. Reported production volumes for the third quarter reflect this closing date.

Total company volumes for the quarter averaged 218.6 thousand barrels of oil equivalent (MBOE) per day. Oil production averaged 63,909 barrels (bbls) per day, up 13 percent from the same period a year ago (17 percent on a pro forma basis) and up four percent from second quarter 2018 levels (eight percent on a pro forma basis). Driven by the 80 wells expected to be brought on production in the second half of 2018 (including 44 wells brought on production in the third quarter) and pro forma for the sale of assets in Ward County, Texas, Cimarex continues to expect oil production growth of 21-23 percent year-over-year. (See Pro Forma Production Reconciliation table below.)

Realized oil prices averaged $58.25 per barrel, up 31 percent from the $44.38 per barrel received in the third quarter of 2017. Realized natural gas prices averaged $1.84 per thousand cubic feet (Mcf) down 31 percent from the third quarter 2017 average of $2.65 per Mcf. NGL prices averaged $25.72 per barrel, up 19 percent from the $21.63 per barrel received in the third quarter of 2017 and up 15 percent sequentially.

Both oil and natural gas prices were negatively impacted by local price differentials. Our realized Permian oil differential to WTI Cushing averaged $(14.34) per barrel in the quarter, compared to $(8.05) per barrel in the second quarter of 2018 and $(4.06) per barrel in the third quarter of 2017. Cimarex's average differential on its Permian natural gas production was $(1.25) per Mcf below Henry Hub in the third quarter of 2018 compared to $(0.29) per Mcf lower in the third quarter of 2017. In the Mid-Continent region, realized gas prices were $(0.94) per Mcf below the Henry Hub index versus $(0.38) per Mcf below Henry Hub in the third quarter of 2017.

Cimarex invested $501 million in exploration and development (E&D) during the third quarter, of which $400 million is attributable to drilling and completion activities. Third quarter investments were funded with cash flow from operations and cash on the balance sheet. Total debt at September 30, 2018 consisted of $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $864 million. Debt was 33 percent of total capitalization.

2018 Outlook
Fourth quarter 2018 production volumes are expected to average 238 - 247 MBOE per day with oil volumes estimated to average 73.0 - 78.0 MBbls per day, or 29 - 38 percent higher than the pro forma fourth quarter 2017 average. The total 2018 daily production volumes are now expected to average 218 - 221 MBOE per day with annual oil volumes estimated to average 66.0 - 67.2 MBbls per day. < They raised the low end of their production guidance.