XEC

[dan_s]

This morning from Stifel:

Yesterday after the close, XEC reported 2014 production and
capex guidance including Y/Y production growth of 13% at the midpoint and a $1.8
billion capex budget, along with solid 30-day rates from two Wolfcamp wells.
Overall, we believe the release is neutral to slightly positive as guidance was
largely in line with both our and Street expectations, but results in the Permian
continue to highlight operational improvements from larger frac jobs and expanding
resource potential. We recently upgraded XEC given its exposure to a growing oily
asset base in the Permian and today’s release supports the view that the testing of
the Wolfcamp across its core three counties should result in an expansion of its
NAV and an increase in share price. We maintain our Buy rating and $120 target
price.

[dan_s]

Cimarex intends to invest $1.4 billion in the Permian Region in 2014, up 40 percent from 2013 capital expenditures of approximately $1 billion. About $1.2 billion will be invested drilling and completing wells, including $600 million in the Wolfcamp shale. About $375 million will be used to drill oil-rich Bone Spring sands and $175 million will be dedicated to drilling Avalon shale wells. Cimarex has allocated $350 million of capital to opportunities in the Mid-Continent region including, nearly $250 million in the Cana-Woodford shale.

Cimarex currently has four downspacing pilots planned in 2014, two in the Wolfcamp D in Culberson County and two Wolfcamp pilots in Reeves County. A four-well, 80-acre spacing pilot in the Wolfcamp A in Reeves County is now underway and drilling will commence on the first four-well, 80-acre spacing pilot in Culberson County later this month. A stacked lateral pilot is currently drilling in Culberson County to determine whether the Wolfcamp D and C can be completed and produced as separate intervals. Another pilot planned in Reeves is designed to simultaneously test both downspacing and stacked lateral spacing in the Wolfcamp A. Drilling will commence on this six-well pilot during the first quarter.

[dan_s]

Cimarex Energy (XEC): An updated Net Income & Cash Flow Forecast has been posted under the Sweet 16 Tab.

Due to weather related issues, XEC's Permian Basin production will be down in Q4 from Q3. My Fair Value Estimate is $133.85, but I think the share price may pull back a bit when they release Q4 results.

If you are not familiar with XEC I suggest you read our profile. This is a first class company with many years of growth locked in.

[dan_s]

XEC finished the day (1/14) up more than 7%. I think you will see more moves like this as it becomes clear that Q4 results are going to be strong and the Sweet 16 are all going to generate strong production growth next year.

BTW higher natural gas prices really improve the outlook for XEC.

Timing is everything and I believe this Thursday's Ngas storage report and move cold air moving across the Great Lakes region at the same time is going to push up NG prices.