XEC is Rock Solid

[dan_s]

DENVER (AP) -- Oil and gas producer Cimarex Energy Co. said its fourth-quarter profit dipped less than 1 percent as higher costs offset an increase in revenue. But the company said it will boost production this year and shares rose 18 percent in afternoon trading.

The company said Wednesday it expects 2012 production volumes to increase between 4 percent and 10 percent to the average daily equivalent of between 615 million and 650 million cubic feet of gas.

The primary reason the stock price spiked is because their production is shifting to more liquids. I will post an updated forecast model under the Watch List tab tomorrow. - dan

[dan_s]

I will have my updated forecast model posted under the Watch List Tab later today (2/16). I have assigned XEC to one of the SMU interns to update the profile. We should have it ready next week.
I still like this company a lot. It has very little debt and a solid track record. Production will grow in 2012 but more important is that the percentage of liquids production will be growing a lot faster. They have some very nice Permian Basin acreage. - Dan
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Proved reserves grew 9% to 2.05 Tcfe in 2011. Adjusting for the impact of property sales, proved reserves increased 23%. Reserves added through drilling replaced 272% of production.

Full-year 2011 investment for exploration and development totaled $1.58 billion. Funding of the capital program was largely provided by cash flow and property sales. Long-term debt at December 31, 2011 was $405 million. Debt to total capitalization ratio at quarter-end was 11%(2). < VERY STRONG BALANCE SHEET

2012 Outlook

Full-year 2012 Mid-Continent and Permian production volumes are projected to grow 19-25% above 2011, averaging between 580-610 MMcfe/d. Gulf Coast volumes, assuming no drilling contribution, are projected to average 35-40 MMcfe/d for 2012, or 6% of total estimated company volumes. Total company 2012 volumes are projected to average 615-650 MMcfe/d, or 4%-10% growth over 2011.

First-quarter 2012 Mid-Continent and Permian production volumes are projected to increase 25%-28% over first-quarter 2011, to within a range of 550-565 MMcfe/d. Gulf Coast volumes, assuming no drilling contribution, are projected to average 45-50 MMcfe/d for the first quarter of 2012. Total company first-quarter 2012 volumes are projected to average 595-615 MMcfe/d.

Full-year 2012 capital expenditures are expected to range from $1.4-$1.6 billion. Nearly all the 2012 capital is directed towards oil drilling or liquids-rich gas in the Permian and Cana-Woodford. We have a large inventory of drilling opportunities, limited lease expirations and few service commitments. Actual amount invested will depend on our calculated rate of return which is significantly influenced by commodity prices.

[dan_s]

After going over the transcript of the XEC conference call, I made a few changes to the forecast model. Nothing major but I reposted it under the Watch List.

XEC has a very clean Balance Sheet with low debt. They are focused on increasing their liquids production this year. A very good plan.

We will post a new company profile on Friday, February 17.