Cimarex Reports Third-Quarter 2009 Financial Results
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DENVER, Nov. 3 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC) today reported third-quarter 2009 net income of $38.7 million, or $0.46 per diluted share. Reducing third-quarter earnings are mark-to-market losses on derivatives of $17.5 million ($10.3 million after tax) and impairment of well equipment and supplies of $5.4 million ($3.2 million after tax).
A year ago, Cimarex had a third-quarter loss of $232.4 million, or $2.85 per share. Third-quarter 2008 results included a $657.1 million ($417.4 million after-tax) full-cost ceiling test write-down.
Revenues from oil and gas sales in the third quarter of 2009 were $238.3 million, a 57% decrease compared to $552.4 million in the same period of 2008. Third-quarter 2009 cash flow from operations totaled $181.7 million versus $413.8 million in the same period of 2008(1).
The decrease in third-quarter 2009 revenues and cash flow is primarily a result of lower oil and gas prices. Third-quarter 2009 gas prices decreased 61% to $3.80 per thousand cubic feet (Mcf) and oil fell 45% to $63.49 per barrel from the same period of 2008.
Third-quarter 2009 oil and gas production averaged 441.5 million cubic feet equivalent per day (MMcfe/d), comprised of 306.8 million cubic feet of gas and 22,439 barrels of oil. Reflecting our planned reduction in drilling, daily production decreased 9% from a year-earlier. Cimarex's third-quarter 2009 operated rig count averaged nine versus 43 in the comparable period of 2008.
For the first nine months of 2009, Cimarex had a net loss of $416.6 million, or $5.10 per share, as compared to net income of $146.1 million, or $1.71 per share, for the comparable period of 2008. The net loss for 2009 includes a first-quarter full-cost ceiling test write-down of $791.1 million ($501.8 million after-tax).
Capital
Third-quarter 2009 exploration and development (E&D) capital totaled $126.2 million, down from $418.9 million in the third quarter of 2008. In the third quarter of 2009, Cimarex drilled 29 gross (21 net) wells, completing 93% as producers.
For the first nine months of 2009, E&D capital expenditures were $366.9 million versus $1,085.8 million during the comparable period of 2008. During 2009 we have drilled 76% fewer wells as compared to 2008. We expect 2009 capital expenditures will range from $500-$550 million.
Other
Cimarex has oil and natural gas hedge contracts for October 2009 through December 2010. Calendar 2010 hedges cover on average 11,000 barrels of oil per day and 160,000 MMBtu of gas per day, representing slightly less than half of expected production. The following tables summarize the current commodity hedge position:
Natural Gas Contracts
Weighted Average Price
----------------------
Period Type Volume (2) Index(3) Floor Ceiling Swap
------ ---- --------- ------ ----- ------- ----
Oct 09 -
Dec 09 Collar 143,370 PEPL $3.00 $5.00 $-
Jan 10 -
Dec 10 Collar 100,000 PEPL $5.00 $6.62 $-
Jan 10 -
Dec 10 Swap 40,000 PEPL $- $- $5.18
Jan 10 -
Dec 10 Collar 20,000 HSC $5.00 $6.85 $-
------
160,000
Oil Contracts
Weighted Average Price
----------------------
Period Type Volume(2) Index(3) Floor Ceiling Put
------ ---- -------- -------- ----- ------- ---
Jan 10 -
Dec 10 Collar 10,000 WTI $60.03 $92.07 $-
Jan 10 -
Dec 10 Floor/Put 1,000 WTI $- $- $60.00
-----
11,000
Cimarex accounts for these commodity contracts using the mark-to-market accounting method.
Total long-term debt at the end of the third quarter was $523.8 million. As of September 30, 2009, our debt to total capitalization ratio was 21% (4).
As previously announced, Cimarex's bank group reaffirmed the Company's $1.0 billion borrowing base related to its credit facility maturing in April 2012. Bank group commitments of $800 million also remain unchanged. As of September 30, 2009, Cimarex had bank borrowings outstanding of $156 million, which is $183 million less than the second-quarter balance of $339 million. The reduction in borrowings was funded from non-core property sales, tax refunds, lower capital spending relative to cash flow and a net positive working capital change.
Immediately after quarter-end, Cimarex completed the sale of its interest in a Texas secondary recovery oil field for $81 million, which further reduced bank borrowings to $115 million. Year-to-date asset sales total approximately $117 million, with associated proved reserves of 28 billion cubic feet equivalent and 8 MMcfe/d of production.
Outlook
Based on current drilling and completion activity and including the impact of property sales, fourth-quarter 2009 production is projected to range between 440-455 MMcfe/d, resulting in full-year 2009 volumes of 455-460 Mcfe/d. Fourth-quarter projections have been reduced by approximately 8 MMcfe/d for properties sold, including the $81 million sale of the Texas secondary recovery oil field closed the first week of October.
Expenses for the fourth quarter of 2009 are expected to fall within the following ranges:
Expenses ($/Mcfe):
Production expense $1.10 - $1.20
Transportation expense 0.19 - 0.24
DD&A and ARO accretion 1.40 - 1.70
General and administrative expense 0.24 - 0.30
Taxes other than income (% of oil and gas 7.5% - 8.5%
revenue)
Conference call and web cast
Cimarex will also host a conference call today at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time). To access the live, interactive call, please dial (800) 921-0061 and reference call ID # 36165491 ten minutes before the scheduled start time. A digital replay will be available for one week following the live broadcast at (800) 642-1687 and by using the conference ID # 36165491. The listen-only web cast of the call will be accessible via www.cimarex.com.
1. Cash flow from operations is a non-GAAP financial measure. See below for
a reconciliation of the related amounts.
2. Gas volume in MMBtu per day and oil volume in barrels per day.
3. PEPL refers to Panhandle Eastern Pipe Line, Tex/Ok Mid-Continent index
and HSC stands for Houston Ship Channel Gulf Coast index both as quoted
in Platt's Inside FERC. WTI refers to West Texas Intermediate oil price
as quoted on the New York Mercantile Exchange.
4. Reconciliation of debt to total capitalization, which is a non-GAAP
measure, is: long-term debt of $523.8 million divided by long-term debt
of $523.8 million plus stockholders' equity of $1,933.2 million.
About Cimarex Energy
Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production company with principal operations in the Mid-Continent, Permian Basin and Gulf Coast areas of the U.S.
This communication contains statements that constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and beliefs and are subject to a number of risks, uncertainties and assumptions that could cause actual results to differ materially from those described in the forward-looking statements. These risks and uncertainties are more fully described in SEC reports filed by Cimarex. While Cimarex makes these forward-looking statements in good faith, management cannot guarantee that anticipated future results will be achieved. Cimarex assumes no obligation and expressly disclaims any duty to update the information contained herein except as required by law.
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three For the Nine
Months Ended Months Ended
September 30, September 30,
------------- -------------
2009 2008 2009 2008
---- ---- ---- ----
(in thousands) (in thousands)
Net cash provided by
operating activities $271,300 $443,157 $465,646 $1,140,709
Change in operating
assets and
liabilities (89,620) (29,315) 6,788 43,705
------- ------- ----- ------
Cash flow from
operations $181,680 $413,842 $472,434 $1,184,414
======== ======== ======== ==========
Management believes that the non-GAAP measure of cash flow from operations
is useful information for investors because it is used internally and is
accepted by the investment community as a means of measuring the company's
ability to fund its capital program. It is also used by professional
research analysts in providing investment recommendations pertaining to
companies in the oil and gas exploration and production industry.
PRICE AND PRODUCTION DATA
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2009 2008 2009 2008
---- ---- ---- ----
Total gas
production - Mcf 28,229,461 32,135,957 87,604,619 95,217,617
Gas volume - Mcf
per day 306,842 349,304 320,896 347,510
Gas price - per Mcf $3.80 $9.76 $3.70 $9.58
Total oil production
- barrels 2,064,400 2,079,835 6,388,336 6,195,523
Oil volume - barrels
per day 22,439 22,607 23,400 22,611
Oil price - per barrel $63.49 $114.87 $50.80 $110.26
OIL AND GAS CAPITALIZED EXPENDITURES
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2009 2008 2009 2008
---- ---- ---- ----
(in thousands) (in thousands)
Acquisitions:
Proved $350 $120 $474 $1,489
Unproved* (10,315) - (10,315) -
------- --- ------- ---
(9,965) 120 (9,841) 1,489
Exploration and
development:
Land and Seismic 7,036 52,485 34,072 109,611
Exploration and
development 119,144 366,456 332,844 976,183
------- ------- ------- -------
126,180 418,941 366,916 1,085,794
Sale proceeds:
Proved (9,877) - (25,271) -
Unproved - - (3,034) -
--- --- ------ ---
(9,877) - (28,305) -
------ --- ------- ---
$106,338 $419,061 $328,770 $1,087,283
======== ======== ======== ==========
* The negative balance reflects purchase price adjustments
related to an acreage acquisition in the fourth quarter of 2008.
CONDENSED STATEMENTS OF OPERATIONS (unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2009 2008 (1) 2009 2008 (1)
---- ------- ---- -------
(In thousands, except per share data)
Revenues:
Gas sales $107,275 $313,523 $324,438 $912,443
Oil sales 131,073 238,918 324,507 683,109
Gas gathering,
processing and
other 10,732 24,163 31,165 73,734
Gas marketing,
net 54 654 888 2,225
--- --- --- -----
249,134 577,258 680,998 1,671,511
------- ------- ------- ---------
Costs and expenses:
Impairment of
oil and gas
properties - 657,146 791,137 657,146
Depreciation,
depletion,
amortization
and accretion 63,264 149,410 214,456 411,623
Production 42,682 55,362 139,127 156,506
Transportation 8,760 10,621 25,233 29,551
Gas gathering
and processing 4,830 12,591 14,347 35,787
Taxes other
than income 19,728 39,097 50,525 109,453
General and
administrative 12,522 12,377 29,803 37,837
Stock compensation,
net 2,477 2,791 6,831 7,432
Loss on derivative
instruments, net 17,357 - 17,613 -
Other operating,
net 2,911 11,871 19,094 12,992
----- ------ ------ ------
174,531 951,266 1,308,166 1,458,327
------- ------- --------- ---------
Operating income
(loss) 74,603 (374,008) (627,168) 213,184
Other (income) and
expense:
Interest expense 8,862 7,789 26,554 23,943
Amortization of
deferred
financing costs 1,761 277 3,590 842
Capitalized
interest (5,295) (5,671) (16,230) (14,930)
Other, net 3,737 (8,086) 11,627 (16,610)
----- ------ ------ -------
Income (loss)
before income tax 65,538 (368,317) (652,709) 219,939
Income tax expense
(benefit) 26,833 (135,894) (236,121) 73,811
------ -------- -------- ------
Net income (loss) $38,705 $(232,423) $(416,588) $146,128
======= ========= ========= ========
Earnings (loss) per
share to common
stockholders (2):
Basic $0.46 $(2.85) $(5.10) $1.74
===== ====== ====== =====
Diluted $0.46 $(2.85) $(5.10) $1.71
===== ====== ====== =====
Dividends per share $0.06 $0.06 $0.18 $0.18
===== ===== ===== =====
Shares attributable to
common stockholders:
Common shares
outstanding 81,792 81,576 81,792 81,576
====== ====== ====== ======
Diluted common
shares outstanding 82,177 81,576 81,792 83,275
====== ====== ====== ======
(1) Effective January 1, 2009, we adopted a new rule promulgated by the
Financial Accounting Standards Board (FASB) pertaining to the accounting
treatment for convertible debt instruments that may be settled in cash
upon conversion. The requirements are to be applied retrospectively to
previously issued convertible instruments. These changes resulted in
additional non-cash interest expense of approximately $0.46 million and
$1.4 million applied retrospectively to the third quarter of 2008 and
first nine months of 2008, respectively. In addition, long-term debt at
December 31, 2008 was decreased by $3.6 million, deferred income tax
liability increased by $1.3 million and stockholder's equity increased by
$2.3 million.
(2) Effective January 1, 2009, we adopted a new rule promulgated by the
FASB which defines when certain share based payment awards are to be
treated as participating securities in the calculation of earnings per
share. The rule requires qualifying awards to be included in computing
earnings per share using the two-class earnings allocation method and is
to be applied retrospectively to prior periods. Under the two-class
earnings allocation method, earnings available to common stockholders do
not include earnings attributable to unvested restricted stock and stock
units, which are considered participating securities. Shares attributed to common stockholders do not include outstanding restricted stock.
Neither potential common shares nor participating securities are included
in the diluted computations when a loss from continuing operations exists.
For complete details of the earnings per share calculation, please refer
to our quarterly financial statements, filed with the SEC on Form 10-Q and
posted on our website.
CONDENSED CASH FLOW STATEMENTS (unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
------------------- -------------------
2009 2008 (1) 2009 2008 (1)
---- -------- ---- --------
(In thousands) (In thousands)
Cash flows from operating
activities:
Net income (loss) $38,705 $(232,423) $(416,588) $146,128
Adjustment to reconcile
net income (loss) to net
cash provided by
operating activities:
Impairments 2,910 657,146 804,815 657,146
Depreciation, depletion,
amortization and
accretion 63,264 149,410 214,456 411,623
Deferred income taxes 13,528 (162,962) (220,592) (38,840)
Stock compensation,
net 2,477 2,791 6,831 7,432
Derivative
instruments, net 17,532 - 21,157 -
Changes in non-
current assets and
liabilities 42,794 (333) 48,673 (94)
Amortization of
deferred financing
costs and other, net 470 213 13,682 1,019
Changes in operating assets
and liabilities:
(Increase) decrease in
receivables, net 7,738 82,375 84,044 (20,762)
(Increase) decrease in
other current assets 43,404 (13,622) 17,404 (59,669)
Increase (decrease) in
accounts payable and
accrued liabilities 38,478 (39,438) (108,236) 36,726
------ ------- -------- -------
Net cash provided
by operating
activities 271,300 443,157 465,646 1,140,709
------- ------- ------- ---------
Cash flows from
investing activities:
Oil and gas
expenditures (97,366) (385,651) (390,108)(1,026,719)
Sales of oil and
gas and other assets 19,993 79 38,556 434
Sales of short-term
investments 2,098 2,227 3,328 9,288
Other expenditures (10,404) (22,167) (21,131) (43,253)
------- ------- ------- -------
Net cash used
by investing
activities (85,679) (405,512) (369,355)(1,060,250)
------- -------- -------- ----------
Cash flows from
financing activities:
Net increase (decrease)
in bank debt (183,000) - (64,000) -
Financing costs
incurred (34) - (17,995) (50)
Dividends paid (5,047) (5,033) (15,123) (15,007)
Issuance of common
stock and other 2,462 (30) 2,576 12,931
----- --- ----- ------
Net cash used
in financing
activities (185,619) (5,063) (94,542) (2,126)
-------- ------ ------- ------
Net change in cash and
cash equivalents 2 32,582 1,749 78,333
Cash and cash
equivalents at
beginning of period 2,960 168,801 1,213 123,050
----- ------- ----- -------
Cash and cash
equivalents at
end of period $2,962 $201,383 $2,962 $201,383
====== ======== ====== ========
(1) Effective January 1, 2009, we adopted a new rule promulgated by the
Financial Accounting Standards Board pertaining to the accounting
treatment for convertible debt instruments that may be settled in cash
upon conversion. The requirements are to be applied retrospectively to
previously issued convertible instruments. These changes resulted in
additional non-cash interest expense of approximately $0.46 million and
$1.4 million applied retrospectively to the third quarter of 2008 and
first nine months of 2008, respectively. In addition, long-term debt at
December 31, 2008 was decreased by $3.6 million, deferred income tax
liability increased by $1.3 million and stockholder's equity increased by
$2.3 million.
BALANCE SHEETS (unaudited)
September 30, December 31,
Assets 2009 2008 (1)
---- --------
(In thousands, except share data)
Current assets:
Cash and cash equivalents $2,962 $1,213
Restricted cash 593 502
Short-term investments - 2,502
Receivables, net 173,914 259,082
Oil and gas well equipment
and supplies 166,021 186,062
Deferred income taxes 8,566 2,435
Derivative instruments 3,150 -
Other current assets 26,303 63,148
------ ------
Total current assets 381,509 514,944
------- -------
Oil and gas properties at cost,
using the full cost
method of accounting:
Proved properties 7,476,167 7,052,464
Unproved properties and
properties under development,
not being amortized 385,321 465,638
--------- --------
7,861,488 7,518,102
Less - accumulated
depreciation, depletion and
amortization (5,696,671) (4,709,597)
--------- ----------
Net oil and gas properties 2,164,817 2,808,505
--------- ---------
Fixed assets, net 122,984 119,616
Goodwill 691,432 691,432
Other assets, net 35,420 30,436
------ -------
$3,396,162 $4,164,933
========== ==========
Liabilities and Stockholders'
Equity
Current liabilities:
Accounts payable $19,646 $101,157
Accrued liabilities 202,544 263,994
Derivative instruments 12,645 -
Revenue payable 90,027 104,438
------ -------
Total current liabilities 324,862 469,589
------- -------
Long-term debt 523,753 587,630
------- -------
Deferred income taxes 327,653 500,945
------- -------
Other liabilities 286,711 255,122
------- -------
Stockholders' equity:
Preferred stock, $0.01 par value,
15,000,000 shares authorized,
no shares issued - -
Common stock, $0.01 par value,
200,000,000 shares authorized,
83,511,991 and 84,144,024
shares issued, respectively 835 841
Treasury stock, at cost,
zero and 885,392 shares
held, respectively - (33,344)
Paid-in capital 1,853,876 1,874,834
Retained earnings 78,546 510,271
Accumulated other
comprehensive loss (74) (955)
--- ----
1,933,183 2,351,647
--------- ---------
$3,396,162 $4,164,933
========== ==========
(1) Effective January 1, 2009, we adopted a new rule promulgated by the
Financial Accounting Standards Board pertaining to the accounting
treatment for convertible debt instruments that may be settled in cash
upon conversion. The requirements are to be applied retrospectively to
previously issued convertible instruments. These changes resulted in
additional non-cash interest expense of approximately $0.46 million and
$1.4 million applied retrospectively to the third quarter of 2008 and
first nine months of 2008, respectively. In addition, long-term debt at
December 31, 2008 was decreased by $3.6 million, deferred income tax
liability increased by $1.3 million and stockholder's equity increased by
$2.3 million.
SOURCE Cimarex Energy Co.
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