Energy Prospectus

Adjusted Net Income and Cash Flow From Operations came in slightly above my forecast. - Dan

DENVER, Nov. 4, 2014 /PRNewswire/ -- Cimarex Energy Co. (XEC) today reported third quarter 2014 net income of $144.3 million, or $1.65 per diluted share. This compares to 2013 third quarter net income of $138.4 million or $1.59 per diluted share. Adjusted 2014 third quarter net income was $1.53 per diluted share(1). Third quarter 2014 adjusted cash flow from operations was $439.7 versus $394.0 million a year ago(1). Revenues from oil and gas sales for the third quarter totaled $636.5 million compared to $549.6 million in the same period of 2013.

I have updated my Net Income & Cash Flow Forecast model for XEC, but I cannot post it to the EPG website.

The company reported strong Q3 results and they are definitely on-track for one of the best years in company history. However, because they do not have any of their 2015 production hedged I am being more conservative on my outlook for next year.

I have lowered by Fair Value Estimate by $7.10 to $167.40/share. This compares to First Call's Price target of $159.89.

XEC does produce a lot of natural gas. If natural gas prices do spike this winter it would give their revenues a nice boost. I really like their exposure to what is going on in Central Oklahoma. The Meramec could turn into a major play for XEC and the also have acreage with Springer Shale potential.

Mid-Continent production averaged 517.9 MMcfe per day for the third quarter of 2014, a 53 percent increase over the third quarter 2013 average of 337.6 MMcfe per day. The Cana-Woodford area represented 406.1 MMcfe per day, or 78 percent of Mid-Continent production in the third quarter. Year-to-date Cimarex has drilled and completed 106 gross (43 net) wells in the region, 80 gross (36 net) of which were in the Cana-Woodford shale play.

Cimarex currently has four rigs operating in the Mid-Continent region, two of which are drilling Cana-Woodford infill development wells. One Meramec test is now drilling and three additional Meramec wells are in various stages of completion. At September 30, nine gross (2.3 net) wells were awaiting completion.