Cimarex Reports Fourth Quarter and Full Year 2018 Results

  • Feb 21, 2019
  • PR Newswire

Cimarex Energy Co. (NYSE: XEC) today reported fourth quarter 2018 net income of $316.2 million, or $3.32 per share, compared to $174.7 million, or $1.83 per share, in the same period a year ago. Fourth quarter adjusted net income (non-GAAP) was $189.7 million, or $1.98 per share, compared to fourth quarter 2017 adjusted net income (non-GAAP) of $140.0 million, or $1.47 per share1. Net cash provided by operating activities was $393.2 million in the fourth quarter of 2018 compared to $340.8 million in the same period a year ago. Adjusted cash flow from operations (non-GAAP) was $428.2 million in the fourth quarter of 2018 compared to $357.1 million in the fourth quarter a year ago1.

Driven by solid execution, total company volumes for the fourth quarter averaged 251.3 thousand barrels of oil equivalent (MBOE) per day. Oil production averaged 79,904 barrels (bbls) per day, up 29 percent from the same period a year ago and up 25 percent from third quarter 2018 levels.

Realized oil prices averaged $49.30 per barrel on the fourth quarter, down 5 percent from the $51.68 per barrel received in the fourth quarter of 2017 and realized natural gas prices averaged $2.16 per thousand cubic feet (Mcf) down 16 percent from the fourth quarter 2017 average of $2.58 per Mcf. NGL prices averaged $20.71 per barrel, down 20 percent from the $25.88 per barrel received in the fourth quarter of 2017. For the full year, Cimarex realized $56.61 per barrel of oil, up 20 percent from 2017, $1.99 per Mcf of natural gas and $22.28 per barrel of NGLs sold. Realized prices for 2018 reflect the adoption of Accounting Standards Codification 606 (ASC 606). See table below (Impact of ASC 606) for comparison of realized prices for 2018 for pre- and post-ASC 606.

During 2018, both oil and natural gas prices were negatively impacted by local price differentials. Our realized Permian oil differential to WTI Cushing averaged $(9.82) per barrel in 2018. Cimarex's average differential on its Permian natural gas production was $(1.40) per Mcf below Henry Hub in 2018 and, in the Mid-Continent region, realized gas prices were $(0.86) per Mcf below the Henry Hub index.

Cimarex invested $1.57 billion in exploration and development (E&D) in 2018, including $380 million in the fourth quarter. Investments made in 2018 were funded with cash flow from operations and cash on the balance sheet. Total debt at December 31, 2018, consisted of $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $800.7 million at year-end. Debt was 31 percent of total capitalization2.

Proved reserves at December 31, 2018, totaled 591 million barrels of oil equivalent (MMBOE), up six percent year over year. Proved developed reserves increased eight percent to 501 MMBOE. Cimarex added 159 MMBOE through extensions and discoveries and deducted 23 MMBOE through net revisions resulting in reserve replacement of 168 percent of 2018 production. Proved reserves are 85 percent proved developed.

On August 31, 2018, we closed on the sale of properties in Ward County, Texas, and have received $534.6 million in net cash proceeds adjusted for the resolution of all asserted defects as of December 31, 2018. On November 18, 2018, Cimarex entered into a merger agreement to acquire Resolute Energy Corporation in a cash and stock transaction valued at $1.6 billion, including the assumption of Resolute's long-term debt, which was approximately $710 million. The transaction is expected to close on March 1, 2019, and is subject to the approval of the Resolute shareholders and the satisfaction of certain regulatory approvals and other closing conditions.

Operations Update

Cimarex invested $1.57 billion in E&D in 2018--70 percent in the Permian region and 30 percent in the Mid-Continent. An additional $103 million was invested in midstream operations and other infrastructure in 2018. Of the $1.57 billion of E&D investment in 2018, $1.35 billion (86 percent) went toward the drilling and completion of new wells.

During 2018, Cimarex participated in the drilling and completion of 349 gross (122 net) wells. At year-end, 83 gross (28 net) wells were waiting on completion, of which 48 gross (8 net) were in the Mid-Continent and 35 gross (20 net) were in the Permian. Cimarex currently operates 11 drilling rigs.

Permian Region

Production from the Permian region averaged 147,404 BOE per day in the fourth quarter, a 31 percent increase from fourth quarter 2017. Oil volumes averaged 61,621 barrels per day, a 29 percent increase from fourth quarter 2017. For the full year, production averaged 126,124 BOE per day, up 20 percent year over year.

Cimarex brought 40 gross (32 net) wells on production in the Permian region during the fourth quarter. Activity in the fourth quarter included first production from 32 wells in the Wolfcamp, Avalon and Bone Spring formations. Of note is a 10,000-ft lateral, the Kingman 45 State Unit 3H, a Third Bone Spring test on the western side of Culberson County, Texas. This new zone had average 30-day initial peak production of 2,917 BOE per day including 1,965 barrels of oil per day (67 percent). Cimarex had additional success in the Third Bone Spring in Lea County, New Mexico, where three 5,000-ft laterals had an average 30-day peak initial production of 1,461 BOE per day (81 percent oil).

Cimarex brought 129 gross (80 net) wells on production in the Permian region in 2018. About 70 percent of our operated wells were drilled from multi-well pads and our average lateral length on our operated wells in the Permian was 7,617 feet in 2018. Cimarex currently operates ten rigs in the region. Please see our press release announcing our 2019 capital plans as well as our most recent presentation for more details.

Mid-Continent Region

Production from the Mid-Continent averaged 103,432 BOE per day for the fourth quarter, up 17 percent from fourth quarter 2017 and up six percent sequentially. Oil volumes averaged 18,122 barrels per day and represented 18 percent of the region's total equivalent production. For the full year, production averaged 95,307 BOE per day, up 12 percent year over year.

Wells brought on production during the fourth quarter totaled 46 gross (6 net) in the Mid-Continent region, bringing the total wells in 2018 to 220 gross (42 net). At the end of the quarter, 48 gross (8 net) wells were waiting on completion.

Activity in the region continues to focus on the Woodford and Meramec shale plays in western Oklahoma. Cimarex currently operates one rig in the Mid-Continent. Please see our press release announcing our 2019 capital plans as well as our most recent presentation for more details.

Production by Region

Cimarex's average daily production and commodity price by region is summarized below:

*Realized prices for 2018 reflect the adoption of ASC 606. See Impact of ASC 606 table for a comparison of 2018 realized prices on a pre- and post-ASC 606 basis.

Other

The following table summarizes Cimarex's current hedge positions:

Conference call and webcast

Cimarex will host a conference call tomorrow, February 21, at 11:00 a.m. EST (9:00 a.m. MST) to discuss its fourth quarter and 2018 financial and operating results as well as management's outlook for 2019. The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To join the live, interactive call, please dial 866-367-3053 ten minutes before the scheduled start time (callers in Canada dial 855-669-9657 and international callers dial 412-902-4216).

A replay will be available on the company's website.

Investor Presentation

For more details on Cimarex's 2018 results, please refer to the company's investor presentation available at www.cimarex.com.