Energy Prospectus

DENVER, Feb. 19, 2013 /PRNewswire/ -- Cimarex Energy Co. (XEC) today reported fourth-quarter 2012 net income of $99.2 million, or $1.14 per diluted share. This compares to fourth-quarter 2011 earnings of $116.9 million, or $1.36 per diluted share. Fourth-quarter 2012 results include a $16.4 million royalty litigation charge ($0.12 per share after-tax) and a $11.1 million benefit for severance tax refunds ($0.08 per share after-tax) totaling a net reduction for the quarter of $0.04 per share after-tax.

Oil, gas and natural gas liquids (NGLs) revenue in the fourth quarter of 2012 totaled $429.8 million, a 3% increase compared to $417.5 million in the same period of 2011. Fourth-quarter 2012 adjusted cash flow from operations was $300.1 million versus $310.2 million a year ago(1).

Fourth-quarter 2012 production volumes averaged a record 676.7 million cubic feet equivalent (MMcfe) per day as compared to fourth-quarter 2011 output of 601.4 MMcfe per day. Oil production grew 28% to a record 35,099 barrels per day. Permian Basin oil production grew 42% to 27,091 barrels per day. Combined fourth-quarter 2012 Permian and Mid-Continent volumes hit an all-time high of 643.3 MMcfe per day, growing 21% over the same period in 2011. Fourth-quarter 2012 production volumes were 49% gas, 31% oil and 20% NGLs.

Full-year 2012 net income totaled $353.8 million, or $4.07 per diluted share, as compared to $529.9 million, or $6.15 per share, for 2011. Full-year 2012 adjusted cash flow from operations totaled $1.13 billion versus $1.31 billion for 2011(1).

At year-end the previously announced sale of $294 million of certain non-core, long-lived oil and gas properties was closed. The properties had current production of approximately 2,550 barrels equivalent (Boe) per day (75% oil) and proved reserves of 9.1 million barrels equivalent.

Full-year 2012 investment for exploration and development totaled $1.6 billion. Funding of the capital program was largely provided by cash flow and property sales. Long-term debt at December 31, 2012 was $750 million. Debt to total capitalization at quarter-end was 18%(2).

From Seeking Alpha:

Cimarex Energy (XEC) gave shareholders something to cheer about earlier this week with a stellar earnings report that might have gotten overlooked due to the overall sell-off in equities. However, analysts sure seemed to have noticed as several raised their price targets on this fast growing E&P concern. Growth investors should put the company on their radar as well.

Recent positives for XEC:

The company provided its fourth quarter earnings report this week and Cimarex easily beat consensus on both the top and the bottom lines. It was the second quarter in a row the company beat earnings estimates after a few disappointing quarters.
> JPMorgan just raised its price target to $79 on the shares from $72 a share.
> Dahlman Rose also reiterated its "Buy" rating and raised its price target to $80 from $70 on the shares.
> CLSA recommended the shares and put an $89 price target on XEC.
Cimarex Energy is an independent oil and gas exploration and production company primarily in Texas, Oklahoma, New Mexico and Kansas.

Four reasons XEC is a solid buy for growth investors at $69 a share:

Analysts project the company will grow revenues in the mid double digits for both FY2013 and FY2014.
The company has grown its operating cash flow by approximately 70% over the past three years and the stock is selling at roughly 5.5x operating cash flow.
Cimarex has a diversified asset base and a conservative balance sheet. Global Hunter believes the company may have more than 860 future drilling locations in its core areas.
The company is doing a good job of improving its production mix. oil and liquids now make up almost 50% of production. Cimarex grew oil and liquids production at a double digit rate in 2012 while natural gas production slightly declined. All of the company's cap-ex is geared to oils and liquids production. The shares trade at a reasonable 12x forward earnings given analysts growth projections.

Sweet 16 Growth Portfolio: An updated Net Income & Cash Flow Forecast model for Cimarex Energy (XEC) has been posted under the Sweet 16 Tab. My adjusted Fair Value Estimate can be found at the bottom of the spreadsheet. This one is looking good!