Energy Prospectus

Cimarex Energy Co. (NYSE: XEC) today reported first quarter 2019 net income of $26.3 million, or $0.26 per share, compared to $186.3 million, or $1.96 per share, in the same period a year ago. First quarter adjusted net income (non-GAAP) was $117.3 million, or $1.20 per share, compared to first quarter 2018 adjusted net income (non-GAAP) of $173.6 million, or $1.82 per share. - Adjusted Net Income compares to my forecast of $118.3 million.

Net cash provided by operating activities was $250.1 million in the first quarter of 2019 compared to $383.1 million in the same period a year ago. Adjusted cash flow from operations (non-GAAP) was $351.1 million in the first quarter of 2019 compared to $367.2 million in the first quarter a year ago. < Adjusted cash flow from operations compares to my forecast of $349.8 million.

DENVER, May 8, 2019 /PRNewswire/ --

> Resolute acquisition closed
> Daily production averaged 258.9 MBOE; oil production averaged 79,415 barrels per day < Compares to my forecasts of 257,000 Boepd and 81,000 BOPD.
> 2Q oil production expected to be up 4% sequentially at the midpoint of guidance
> Oil production expected to grow 18-30% year over year
> 2019 capital guidance unchanged

On March 1, Cimarex closed the previously announced acquisition of Resolute Energy Corporation and began integrating the assets into the company. On March 8, 2019, the company issued $500 million of senior unsecured notes due 2029, which carry an interest rate of 4.375 percent. These notes essentially refinanced Resolute's $600 million 8.50 percent senior notes, which were redeemed as part of the closing of the acquisition.

Michael S. Scialla at Stifel: Cimarex Energy Co. (XEC, $67.29, Buy; Target $115.00)

1Q CF Beats on Production, FCF Plan Intact - - We view the Q1 release as
neutral. The positives include: i) 1Q19 production beat by 3% although oil was
inline with consensus; ii) 1Q19 CFPS slightly beat consensus; iii) the 2019 budget
remained unchanged despite higher oil prices; iv) the Animal Kingdom pad, which is
outperforming our type curve after 225 days, supports 14 lower WC WPS in Culberson
County vs our NAV estimate of 8. The negatives include: i) 1Q19 capex was 9% above
consensus, albeit inline with our estimate; ii) 2Q19 oil production guidance was 4%
below consensus although inline with our estimate (2Q19 Boe guidance was 3%/2%
above SF/consensus).

I have updated my forecast/valuation model for XEC and posted it to the EPG website. My valuation is $120/share. In my opinion, XEC is trading at a deep discount to its net asset value, making it a prime takeover target. Their production should be up more than 20% year-over-year in 2019. For some reason, Wall Street analysts are all over the place on this one even though it is extremely easy to forecast. I have been following and modeling it for over ten years and I have a HIGH LEVEL of confidence in my model. Back in February, Stifel's price target was $140/share. I think Michael Scialla is just lowing his price target to get more in-line with the Wall Street "pack". First Call's price target is $91.83/share. - Dan

TPH: XEC Q1'19 Follow-Up
Q2 guide looks conservative; pricing headwinds remain near-term but start to reverse in 2020+
Sector: NAm E&P | Ticker: XEC | Recommendation: BUY | Target: $109 | Close: $67.68

Yesterday's ccall highlighted that operations are running ahead of schedule with 21 of 30 planned Q2 wells (17 of 21 Permian wells) already online. After truing up our model for timing of TILs, we think guidance is conservative with our oil production at 85.6mbpd (guidance 79.5-85.5mbpd oil). For FY'19, we model at the high end of guidance for production at 275mboepd / 87mbopd (guidance 260-275mboepd / 80-88mbopd) with capex at $1.45B (guidance $1.41-$1.52B). Additionally, management proactively mentioning consideration of committing to LH gas takeaway out of the Permian to reduce marketing risk over the medium term is good to see given how tight Waha has been in recent months. With Q2 guidance out of the way, we see the FY setup as constructive and like XEC for the rate of change on improving realizations in 2020+.

FYI: TIL "turn in line".