Cimarex Energy (XEC)

[dan_s]

An updated Net Income & Cash Flow Forecast model for XEC has been posted under the Sweet 16 Tab.

I have raised my Fair Value Estimate to $104.70/share, which compares to First Call's price target of $84.33.

Cimarex has a VERY STRONG balance sheet. They have a lot of running room in the Permian Basin and should have better than 10% annual production growth locked in for several years. They are on-track to generate more than $15 cash flow per share this year. A strong year-end reserve report will lower their DD&A rate in 2014 and push reported earnings higher than what I have in my forecast.

The only downside is that they have a lot of unhedged natural gas production (341,253 mcfpd in Q2), which could be a positive if we get a cold winter. They sold their gas for $4.08/mcf in the 2nd quarter because it is high btu gas. I am using $3.50/mcf for the forecast periods.

72.3% of 2nd quarter revenues were from the sale of liquids.

Cimarex is currently focused on increasing their crude oil production, which is why I've raised by valuation.