Cimarex Energy Co. (XEC) reported a first quarter 2015 net loss of $414.9 million, or $4.84 per diluted share, primarily the result of a non-cash charge related to the impairment of oil and gas properties. The adjusted first quarter net loss was $31.7 million, or $0.37 per diluted share. First quarter 2015 adjusted cash flow from operations was $186.9 million versus $408.9 million a year ago.
Adjusted EPS and operating CFPS came in below my forecast, but daily production was above my forecast.
Only negative on XEC is that they have very little of their production hedged.
Working on my forecast model now.
Cimarex Energy (XEC) Q1 Results
Cimarex Energy (XEC) Q1 Results
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Cimarex Energy (XEC) Q1 Results
My updated forecast model will be on the website this afternoon.
I have increased my Fair Value Estimate for XEC by $7.00/share to $135.00/share. Compares to First Call's Price Target of $132.65/share.
First quarter results include a HUGE impairment charge. XEC is a Full Cost company, so they must do a "ceiling test" each quarter and write down their Full Cost pool to the valuation at end of the period. All that these non-cash charges do is lower DD&A expense in the future. The oil and gas reserves did not go anywhere. What I hate about the rule is that companies do not get to reverse the write down as oil & gas prices improve.
My valuation went up because XEC raised their production guidance and continues to lower their completed well costs. I think their full year production guidance is too low. This company has a history of being very conservative on their guidance.
XEC has a strong balance sheet and cash flow from operations should cover most of their capital expenditure budget this year. YOY production growth will be 8% to 10% this year.
If you read the newsletter, you know that the outlook for natural gas prices looks a lot better heading into next year. XEC is one of the Sweet 16 companies that will benefit the most from improving natural gas and NGL prices. Their production mix this year is approximately 48% natural gas, 32% crude oil and 20% NGLs. I am expecting oil, gas and NGL prices to drift higher as we move through the year.
I have increased my Fair Value Estimate for XEC by $7.00/share to $135.00/share. Compares to First Call's Price Target of $132.65/share.
First quarter results include a HUGE impairment charge. XEC is a Full Cost company, so they must do a "ceiling test" each quarter and write down their Full Cost pool to the valuation at end of the period. All that these non-cash charges do is lower DD&A expense in the future. The oil and gas reserves did not go anywhere. What I hate about the rule is that companies do not get to reverse the write down as oil & gas prices improve.
My valuation went up because XEC raised their production guidance and continues to lower their completed well costs. I think their full year production guidance is too low. This company has a history of being very conservative on their guidance.
XEC has a strong balance sheet and cash flow from operations should cover most of their capital expenditure budget this year. YOY production growth will be 8% to 10% this year.
If you read the newsletter, you know that the outlook for natural gas prices looks a lot better heading into next year. XEC is one of the Sweet 16 companies that will benefit the most from improving natural gas and NGL prices. Their production mix this year is approximately 48% natural gas, 32% crude oil and 20% NGLs. I am expecting oil, gas and NGL prices to drift higher as we move through the year.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Cimarex Energy (XEC) Q1 Results
Cimarex Energy Co.: 1Q15: Solid Execution
Drew Venker, CFA – Morgan Stanley
May 5, 2015 3:43 AM GMT
Cimarex delivered a cash flow beat on higher production. Strong well performance was driven by enhanced completions and long-laterals. 2015 guidance raised 2% while capex remained unchanged.
2015 production guidance raised, capex unchanged. XEC raised 2015 production guidance 2% (at the midpoint) on the back of strong execution and well performance in the Permian (liquids production guidance raised 4%). E&D capex guidance was unchanged at $0.9-1.1 billion with the low-end of the budget still assumed in the updated production range. Oil volumes are expected to decline in 2H15, with total volumes expected to bottom in 3Q15.
Higher volumes likely on new Bone Spring and Avalon completions.. Cimarex highlighted the positive impact of new Bone Spring completions in its 1Q15 results slide deck (previously shown at IPAA) which likely contributed to the strong 1Q15 oil volumes. We suspect that the company is also experimenting with completion designs in the Avalon, where CXO reported sharply higher productivity in its 1Q15 results.
2Q15 production guidance higher and more oily vs. expectations. 2Q guidance of 975 MMcfe/d (at the midpoint) is 7% above MS and 5% above consensus. Guidance implies 2Q oil volumes are 14% above our estimate, oil production is expected to decline in 2H15.
Gas and NGL prices weaker. Consistent with the industry this quarter, gas realizations were slightly below expectations, while NGL realizations have missed for almost everyone (except for those with fixed price contracts). XEC reported NGL realizations 18% below MS and gas realizations 7% below MS. Gas differentials were wider in both the Permian and the Mid-Con which typically have relatively narrow differentials.
Reeves County density pilot slightly disappointing. However, we believe little if anything was baked into shares for success.
Drew Venker, CFA – Morgan Stanley
May 5, 2015 3:43 AM GMT
Cimarex delivered a cash flow beat on higher production. Strong well performance was driven by enhanced completions and long-laterals. 2015 guidance raised 2% while capex remained unchanged.
2015 production guidance raised, capex unchanged. XEC raised 2015 production guidance 2% (at the midpoint) on the back of strong execution and well performance in the Permian (liquids production guidance raised 4%). E&D capex guidance was unchanged at $0.9-1.1 billion with the low-end of the budget still assumed in the updated production range. Oil volumes are expected to decline in 2H15, with total volumes expected to bottom in 3Q15.
Higher volumes likely on new Bone Spring and Avalon completions.. Cimarex highlighted the positive impact of new Bone Spring completions in its 1Q15 results slide deck (previously shown at IPAA) which likely contributed to the strong 1Q15 oil volumes. We suspect that the company is also experimenting with completion designs in the Avalon, where CXO reported sharply higher productivity in its 1Q15 results.
2Q15 production guidance higher and more oily vs. expectations. 2Q guidance of 975 MMcfe/d (at the midpoint) is 7% above MS and 5% above consensus. Guidance implies 2Q oil volumes are 14% above our estimate, oil production is expected to decline in 2H15.
Gas and NGL prices weaker. Consistent with the industry this quarter, gas realizations were slightly below expectations, while NGL realizations have missed for almost everyone (except for those with fixed price contracts). XEC reported NGL realizations 18% below MS and gas realizations 7% below MS. Gas differentials were wider in both the Permian and the Mid-Con which typically have relatively narrow differentials.
Reeves County density pilot slightly disappointing. However, we believe little if anything was baked into shares for success.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group