DENVER, May 5 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC) today reported first-quarter 2009 financial and operating results. For the quarter, Cimarex reported a net loss of $494.1 million, or $6.05 per share. This compares to first-quarter 2008 earnings of $149.5 million, or $1.73 per diluted share.
Adjusted net income for the first-quarter 2009 was $7.7 million, or $0.09 per diluted share, which excludes a non-cash ceiling test impairment of oil and gas properties of $501.8 million after-tax(1&2). Lower gas prices resulted in the full-cost write-down of oil and gas properties.
Revenues from oil and gas sales in the first quarter of 2009 were $197.2 million, compared to $454.4 million in the same period of 2008. First-quarter 2009 cash flow from operations totaled $133.2 million versus $334.8 million in the same period of 2008(2).
The decrease in first-quarter 2009 revenues, earnings and cash flow is primarily a result of lower oil and gas prices. First-quarter 2009 gas prices decreased 54% to $3.83 per thousand cubic feet (Mcf) and oil fell 62% to $35.70 per barrel from the same period of 2008.
First-quarter 2009 daily oil and gas production averaged 489.0 million cubic feet equivalent per day (MMcfe/d), up 3% from the first-quarter 2008 average of 476.2 MMcfe/d. First-quarter 2009 oil production grew 10% over last year's first-quarter to an average of 25,086 barrels per day. Gas production in the latest quarter averaged 338.5 million cubic feet per day (MMcf/d), flat with the first-quarter 2008 average of 339.7 MMcf/d.
The increase in oil production stems from completing horizontal oil wells in the Permian Basin which were carry-over activity from 2008. Flat year-over-year gas production reflects an overall reduction in drilling and completion activity. As a result of weakening commodity prices, Cimarex has continued to scale back drilling. During March 2009, the company was operating just three drilling rigs, down from 43 during the third quarter of 2008 and 22 at year-end.
Capital
First-quarter 2009 exploration and development capital totaled $142.0 million as compared to $307.0 million in the first quarter of 2008. In the first quarter of 2009, Cimarex drilled 41 gross (24 net) wells, completing 95% as producers. The sharply reduced operated rig count resulted in drilling 68% fewer wells in the first quarter of 2009 as compared to 2008.
Currently, Cimarex has three operated rigs drilling in the Anadarko-Woodford shale Cana play and one drilling in the Gulf Coast. Exploration and development capital investment for the remainder of 2009 is targeted to be generally within cash flow. At the present time, based on current market prices and service costs we would expect 2009 capital expenditures to range from $400-$600 million.
Other
Cimarex entered into Mid-Continent natural gas collar contracts for April through December 2009 covering on average approximately 148,000 MMBtu per day. The Mid-Continent collars have a floor of $3.00 per MMBtu and a ceiling of $5.00 per MMBtu. These contracts cover roughly half of Cimarex's projected 2009 gas production over that period.
In April 2009, Cimarex closed on a new three-year senior secured revolving credit facility. The new credit facility increases bank commitments from $500 million to $800 million. The borrowing base was unchanged at $1 billion. At March 31, 2009, Cimarex had $345 million of borrowings outstanding under its revolving credit facility. Total long-term debt at the end of the first quarter was $712.7 million, with a debt to total capitalization ratio of 28%(3).
(1) Cimarex uses the full-cost method of accounting for its oil and
gas properties. At the end of each quarter, we make a full-cost
ceiling limitation calculation, whereby net capitalized costs
related to proved properties less associated deferred income taxes
may not exceed the amount of the present value discounted at ten
percent of estimated future net revenues from proved reserves less
estimated future production and development costs and related
income tax expense. Future net revenues used in the calculation of
the full-cost ceiling limitation are determined based on period end
oil and gas prices. If net capitalized costs subject to
amortization are greater than the ceiling limit, then the excess is
charged to expense.
(2) Adjusted net income and related per share amounts and cash flow
from operations are non-GAAP financial measures. See below for a
reconciliation of the related amounts.
(3) Reconciliation of debt to total capitalization, which is a non-GAAP
measure, is: long-term debt of $712.7 million divided by long-term
debt of $712.7 million plus stockholders' equity of $1,854.0
million.
Outlook
With a slowdown in our drilling activity, second-quarter 2009 production is projected to range between 444-456 MMcfe/d. Our full-year 2009 production estimate is unchanged from our previous guidance and is projected to be in the range of 440-460 MMcfe/d.
Expenses for the remainder of 2009 are expected to fall within the
following ranges:
Expenses ($/Mcfe):
Production expense $1.20 - $1.30
Transportation expense 0.17 - 0.22
DD&A and ARO accretion 1.40 - 1.70
General and administrative expense 0.22 - 0.28
Taxes other than income (% of oil and gas revenue) 7.0% - 8.0%
Conference call and web cast
Cimarex will host a follow-up conference call today at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time). To access the live, interactive call, please dial (888) 603-6873 and reference call ID # 96176946 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 # 96176946. The listen-only web cast of the call will be accessible via www.cimarex.com.
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 ADJUSTED NET INCOME AND PER SHARE AMOUNTS
For the Three
Months Ended
March 31,
---------
2009 2008
---- ----
(in thousands, except
per share data)
Net income (loss) $(494,100) $149,538
Impairment of oil and gas properties,
net of tax 501,783 -
------- -----
Adjusted net income $7,683 $149,538
====== ========
Attributable to common stockholders (1):
Net income (loss) $(494,100) $149,538
Impairment of oil and gas properties,
net of tax 501,783 -
Less dividends to unvested shares and
restricted stock units (135) (129)
Less earnings attributable to unvested shares
and restricted stock units (71) (3,718)
--- -----
Adjusted earnings to common stockholders $7,477 $145,691
====== ========
Diluted earnings (loss) per share to common
stockholders (1) (2) $(6.05) $1.73
======== ======
Adjusted diluted earnings per share to common
stockholders (1) (2) $0.09 $1.73
===== =====
Diluted common shares outstanding (1) (2) 81,684 84,087
====== ======
Adjusted diluted common shares outstanding (1) (2) 81,938 84,087
====== ======
Adjusted net income and adjusted earnings per diluted share exclude the
impairment of oil and gas properties because management believes these
items affect the comparability of operating results.
