DENVER, Aug. 8 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC)
today announced results from operations for the quarter ended June 30, 2005.
As previously reported, Cimarex completed the acquisition of Magnum Hunter
Resources, Inc. on June 7, 2005. Financial results for the second quarter of
2005 include results of operations from the acquired assets for 23 days.
Expenses related to the merger recorded in the second quarter of 2005 totaled
$6.7 million, or $4.3 million after-tax ($0.08 per share). Cimarex also
recorded a loss on derivative instruments related to the commodity swaps and
collars assumed in the merger of $2.0 million, or $1.3 million after-tax
($0.02 per share).
Including items related to the merger, net income for the second-quarter
2005 was $52.5 million, or $0.98 per diluted share. This compares to second
quarter 2004 earnings of $36.5 million, or $0.85 per diluted share.
F.H. Merelli, Chairman and CEO of Cimarex, said, "We are pleased to have
the Magnum Hunter merger closed. We look forward to integrating the
properties and applying our drilling-focused approach to these assets."
Revenues from oil and gas sales rose 60% in the second quarter of 2005 to
$185.0 million, compared to $115.3 million in the same period of 2004. Second
quarter 2005 cash flow from operations totaled $132.7 million, versus
$84.5 million in the same period of 2004(1).
For the six month period ended June 30, 2005, Cimarex reported net income
of $95.8 million, or $1.98 per diluted share, up from $66.3 million, or
$1.56 per diluted share, for the comparable period of 2004.
Oil and gas sales for the first half of 2005 totaled $322.4 million, up
from $210.8 million during the corresponding period of 2004. Cash flow from
operations for the first six months of 2005 increased to $233.3 million from
$152.3 million during the first half of 2004(1).
The increases in oil and gas revenues, earnings and cash flow are due to
higher oil and natural gas prices and record production volumes. The increase
in production is attributable to the addition of Magnum Hunter operations
during the second quarter and continued positive drilling results.
(1) Cash Flow from Operations is a non-GAAP financial measure that
represents Net Cash Provided By Operating Activities adjusted for
the change in operating assets and liabilities. See below for a
reconciliation of the related amounts.
Production Volumes
Total daily production volumes averaged 295 million cubic feet (MMcf)
equivalent during the second quarter of 2005 versus 220 MMcf equivalent a year
earlier. Cimarex's reported results include Magnum Hunter's production for
the period after the June 7, 2005 merger, or 23 days of the second quarter.
Magnum Hunter production averaged 243.7 MMcfe per day in June, which added
5.6 Bcfe to Cimarex's second quarter 2005 volumes. The following table
summarizes production volumes for Cimarex and Magnum Hunter:
Magnum Hunter Cimarex Q2 Volumes
June 23 Days Stand MHR Total
Q2 2005 2005 of June -alone 23 Days Cimarex
Production:
Natural Gas
(Bcf) 15.9 5.1 3.9 17.2 3.9 21.1
Oil and NGL
(Mbbls) 1,122.6 363.2 278.5 668.1 278.5 946.6
Equivalent
(Bcfe) 22.6 7.3 5.6 21.2 5.6 26.8
Avg. Daily
Production:
No. of Days 91 30 23 91 91 91
Natural Gas
(MMcf/d) 174.6 171.1 171.1 189.1 43.2 232.3
Oil and NGL
(Mbbl/d) 12.3 12.1 12.1 7.3 3.1 10.4
Equivalent
(MMcfe/d) 248.6 243.7 243.7 233.2 61.5 294.7
The oil and natural gas swaps and collars assumed as part of the Magnum
Hunter acquisition are not considered effective hedges under SFAS 133. The
mark-to-market value of the derivative instruments is included in losses on
derivative instruments in the income statement. For the second quarter of
2005 Cimarex recorded a loss on derivative instruments of $2.0 million, or
$1.3 million after-tax ($0.02 per share).
Second-quarter 2005 costs and expenses directly associated with
exploration and production activities totaled $86.8 million versus $52.5
million during the second quarter of 2004. The increase in cost and expense
is primarily a result of the Magnum Hunter acquisition. The largest
components of the increase are a $20.7 million rise in depreciation, depletion
and amortization, and $8.0 million increase in production expense. Production
taxes also grew by $4.1 million due to higher revenues.
Exploration and development (E&D) expenditures during the second quarter
of 2005 totaled $141.0 million, up from $81.6 million for the second quarter
2004. Included in second-quarter 2005 expenditures is $32.7 million incurred
on Magnum Hunter properties during June. In the second quarter of 2005, we
participated in drilling 121 gross wells, with an overall success rate of 93%.
On a net basis, 53 of 60 wells drilled during the second quarter were
successful.
E&D capital expenditures for the first six months of 2005 were
$233.7 million, up from $150.2 million during the first half of 2004. We
drilled 180 gross (96 net) wells during the first six months of 2005,
realizing a success rate of 89%. Including costs incurred by Magnum Hunter
prior to the merger, first-half 2005 E&D expenditures incurred by both
companies totaled $375 million.
Outlook
For the second half of 2005, Cimarex's E&D expenditures are projected to
total approximately $325 million. Together with first-half spending by
Cimarex and Magnum Hunter, total combined 2005 E&D expenditures would equate
to approximately $700 million.
Based upon anticipated capital spending and numerous other factors related
to production volume forecasts, Cimarex's second-half 2005 aggregate
production is expected to range from 475 to 490 MMcfe per day (77% natural
gas).
Certain operating expenses for the remainder of 2005 are expected to fall
within the following ranges summarized below based upon estimated production.
Operating Expenses ($/Mcfe):
Production expense $0.75 - $0.80
Transportation expense 0.12 - 0.15
Depreciation, depletion and amortization 2.10 - 2.20
General and administrative expense 0.27 - 0.30
Production taxes (% of oil and gas revenue) 7.0% - 7.5%
Conference call and web cast
A conference call with management has been scheduled for 11 a.m. Mountain
Time (1 p.m. Eastern), Monday August 8, 2005. Interested parties may access
the call by dialing (800) 938-0653 and requesting the Cimarex Energy Co.
teleconference. In addition, a listen-only web cast of the call will be
provided at http://www.cimarex.com. Please go to the website at least ten minutes
early to register and to download any necessary audio software.
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, Gulf
Coast, Permian Basin of West Texas and New Mexico and Gulf of Mexico 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. Risks, uncertainties and assumptions include 1)
the possibility that problems may arise in successfully integrating the Magnum
Hunter acquisition; 2) the possibility that the acquisition may involve
unexpected costs; 3) the possibility that the industry may be subject to
future regulatory or legislative actions; 4) the volatility in commodity
prices for oil and gas; 5) the presence or recoverability of estimated
reserves; 6) the ability to replace reserves; 7) environmental risks; 8)
drilling and operating risks; 9) exploration and development risks; 10)
competition; 11) the ability of management to execute its plans to meet its
goals and other risks that are described in SEC reports filed by Cimarex.
Because forward-looking statements involve risks and uncertainties, actual
results and events may differ materially from results and events currently
expected by Cimarex. Cimarex assume no obligation and expressly disclaim any
duty to update the information contained herein except as required by law.
PRICE AND PRODUCTION DATA
For the Three Months Ended For the Six Months Ended
June 30 June 30
2005 2004 2005 2004
Gas Production:
Total production
- Mcf 21,142,547 16,096,010 38,778,944 30,226,135
Gas volume - Mcf
per day 232,336 176,879 214,248 166,078
Gas price - per
Mcf $6.49 $5.65 $6.27 $5.47
Oil Production
(including NGL):
Total production
- barrels 946,584 653,758 1,612,938 1,280,375
Oil volume
- barrels per day 10,402 7,184 8,911 7,035
Oil price
- per barrel $50.56 $37.40 $49.21 $35.64
CAPITALIZED COSTS INCURRED
For the Three Months Ended For the Six Months Ended
June 30 June 30
2005 2004 2005 2004
(in thousands) (in thousands)
Exploration and
development $140,971 $81,630 $233,708 $150,249
Acquisition of
Magnum Hunter 1,834,680 -- 1,834,680 --
Acquisitions of other
proved properties 1,705 (7) 1,948 2
Oil and gas
expenditures 1,977,356 81,623 2,070,336 150,251
Sale Proceeds (333) (329) (347) (364)
$1,977,023 $81,294 $2,069,989 $149,887
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three Months Ended For the Six Months Ended
June 30 June 30
2005 2004 2005 2004
(in thousands) (in thousands)
Net cash provided by
operating activities $103,229 $81,350 $199,206 $142,821
Increase in
operating assets
and liabilities 29,511 3,120 34,152 9,525
Cash flow from
operations $132,740 $84,470 $233,358 $152,346
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.
INCOME STATEMENTS (unaudited)
For the Three Months Ended For the Six Months Ended
June 30 June 30
2005 2004 2005 2004
(In thousands, except per share data)
Revenues:
Gas sales $137,159 $90,864 $243,033 $165,196
Oil sales 47,862 24,450 79,370 45,628
Gas gathering,
marketing, and
processing 65,215 53,831 118,951 90,592
Other, net 2,222 1,048 2,811 4,696
252,458 170,193 444,165 306,112
Costs and expenses:
Depreciation,
depletion and
amortization 51,582 30,834 89,667 57,172
Asset retirement
obligation accretion 550 304 935 594
Transportation 3,608 2,493 6,082 4,848
Production 17,412 9,419 27,583 18,888
Taxes other
than income 13,600 9,464 24,495 17,829
Gas gathering,
marketing, and
processing 63,987 53,286 117,214 89,586
General and
administrative 7,657 5,133 15,549 9,642
Stock compensation 1,213 484 2,438 952
Expenses related to
merger 6,685 -- 6,685 --
Loss on derivative
instruments 2,030 -- 2,030 --
168,324 111,417 292,678 199,511
Operating income 84,134 58,776 151,487 106,601
Other income and expense:
Interest expense 3,771 280 3,959 576
Amortization of
fair value of debt (416) -- (416) --
Capitalized interest (1,179) -- (1,179) --
Interest income and
other (693) (102) (1,345) (189)
Income before income
tax expense 82,651 58,598 150,468 106,214
Income tax expense 30,174 22,128 54,626 39,879
Net income $52,477 $36,470 $95,842 $66,335
Earnings per share:
Basic $1.01 $0.88 $2.04 $1.60
Diluted $0.98 $0.85 $1.98 $1.56
Weighted average shares
outstanding:
Basic 51,967 41,379 46,886 41,342
Diluted 53,655 42,704 48,427 42,657
CASH FLOW STATEMENTS (unaudited)
For the Three Months Ended For the Six Months Ended
June 30 June 30
2005 2004 2005 2004
(In thousands)
Cash flows from
operating activities:
Net income $52,477 $36,470 $95,842 $66,335
Adjustment to
reconcile net
income to net cash
provided by
operating
activities:
Depreciation,
depletion and
amortization 51,582 30,834 89,667 57,172
Asset retirement
obligation
accretion 550 304 935 594
Deferred income
taxes 18,807 16,375 36,119 27,299
Stock compensation 1,213 484 2,438 952
Other 8,111 3 8,357 (6)
Changes in operating
assets and
liabilities, net of
effects of the
acquisition of
Magnum Hunter:
(Increase) decrease
in receivables, net 9,470 (8,625) 17,341 (22,060)
(Increase) in other
current assets (4,548) (3,595) (11,962) (4,435)
Increase (decrease)
in accounts payable
and accrued
liabilities (34,117) 8,969 (39,132) 16,812
Increase (decrease)
in other
non-current
liabilities (316) 131 (399) 158
Net cash provided
by operating
activities 103,229 81,350 199,206 142,821
Cash flows from
investing activities:
Oil and gas
expenditures (107,955) (60,923) (204,428) (128,299)
Acquisition of oil
and gas properties (1,705) 7 (1,948) (2)
Merger related costs (11,134) -- (11,134) --
Cash received in
connection with
acquisition of MHR 33,407 -- 33,407 --
Proceeds from
sale of assets 368 339 405 452
Other expenditures (14,269) (1,434) (17,362) (3,386)
Net cash used
by investing
activities (101,288) (62,011) (201,060) (131,235)
Cash flows from
financing activities:
Borrowings (payments)
on long-term debt,
net (60,064) -- (60,064) --
Financing costs (1,370) -- (1,370) --
Common stock
reacquired and
retired (2,063) -- (2,130) (121)
Proceeds from
issuance of
common stock 5,836 249 6,977 6,196
Net cash
(used in)
provided by
financing
activities (57,661) 249 (56,587) 6,075
Net change in cash
and cash equivalents (55,720) 19,588 (58,441) 17,661
Cash and cash
equivalents at
beginning of period 113,025 38,493 115,746 40,420
Cash and cash
equivalents at
end of period $57,305 $58,081 $57,305 $58,081
BALANCE SHEETS (unaudited)
June 30 December 31
Assets 2005 2004
(In thousands, except share data)
Current assets:
Cash and cash equivalents $57,305 $115,746
Receivables, net 208,042 103,989
Inventories 24,290 9,742
Deferred income taxes 23,183 2,149
Assets available for sale 8,434 --
Other current assets 21,223 4,821
Total current assets 342,477 236,447
Oil and gas properties at cost, using
the full cost method of accounting:
Proved properties 3,353,518 1,596,704
Unproved properties and properties
under development, not being amortized 387,523 72,249
3,741,041 1,668,953
Less -- accumulated depreciation,
depletion and amortization (957,034) (866,660)
Net oil and gas properties 2,784,007 802,293
Fixed assets, net 87,947 16,109
Goodwill 730,399 44,967
Other assets, net 52,830 5,630
$3,997,660 $1,105,446
Liabilities and Stockholders' Equity
Current liabilities:
Current maturities of long-term debt $758 $--
Accounts payable 39,510 26,511
Accrued liabilities 171,962 77,362
Derivative fair value 30,742 --
Revenue payable 73,280 39,129
Total current liabilities 316,252 143,002
Long-term debt 572,489 --
Deferred income taxes 643,673 225,285
Other liabilities 161,640 36,447
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,
84,552,041 and 41,729,280 shares
issued, respectively 846 417
Treasury stock, at cost,
2,475,725 shares held (93,236) --
Paid-in capital 1,858,256 250,248
Unearned compensation (18,187) (10,072)
Retained earnings 555,873 460,031
Accumulated other comprehensive income 54 88
2,303,606 700,712
$3,997,660 $1,105,446
SOURCE Cimarex Energy Co.
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Related links:
http://www.cimarex.com
CONTACT:
Mark Burford, Director of Capital Markets of
Cimarex Energy Co., +1-303-295-3995
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