Cimarex Energy (XEC) Q4 Results - Feb 23

[dan_s]

Stifel's Take:
Cimarex Energy Co. (XEC, $52.01, Buy; Target $63.00) -
FCF Ahead of Schedule - Michael S. Scialla -
We view the release as positive.
The positives include: i) 4Q20 pre-dividend FCF of $121MM exceeded consensus by 48% as cash flow was 5% above and capex was 24% below; ii) 2021 production/capex guidance were 4% above/3% below consensus; iii) XEC repurchased 55% of its 8.125% preferred stock; iv) the annual dividend increased 23% to $1.08/sh, implying a dividend yield of 2.2%.
The negatives include: i) 2020 proved reserve additions did not offset production; ii) 4Q20 unit cash costs were 3% above consensus; iii) 1Q21 production guidance was 8% below consensus due to weather. In summary, XEC's FCF outlook, which anticipates positive post-dividend CF at $35 WTI, remains on track to rank among the strongest in our peer group.

MY TAKE:
My valuation of XEC was $52 pre-release.
At the time of this post XEC is trading for $57.31
My valuation will be going much higher due to higher commodity prices and increased confidence in my 2021 model.

Fourth quarter 2020 adjusted net income (non-GAAP) was $91.3 million, or $0.89 per share, which compares to my forecast of $54.2 million or $0.54 per share. Production also beat my forecast.

[dan_s]

I have updated my forecast/valuation model for Cimarex and it will be posted to the EPG website by tomorrow morning.
> XEC increased $5.01 today to closes at $57.02
> I am increasing my valuation by $21 to $73 per share
> XEC's adjusted earning for Q4 beat my forecast, despite WTI averaging less than $39/bbl in Q4. Natural gas and NGL price increases more than offset the lower oil prices from Q3 to Q4.
> The Company provided detailed guidance for 2021 that is probably very conservative.
> XEC generated operating cash flow of $9.18/share in 2020 and based on their guidance, they should generate over $14.50/share operating cash flow year.
> XEC pays a decent dividend which gets them some extra "brownie points".
> My 2021 operating cash flow forecast of $1.5 Billion compares to their capex budget of $650 to $750 million. Lots of FCF for dividend increases and reducing debt.
> If WTI does go to Goldman Sachs' forecast of $75/bbl, XEC could deserve a $100/share price target.