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Why Cimarex (XEC) is on the Rise Despite Q2 Earnings Miss
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Despite the announcement of weak second-quarter results on Aug 5, Cimarex Energy Co. has seen 6.2% rise in share price since the release. Investors appreciate the company’s increasing efficiencies in operations, which are expected to enable the firm to generate more cash, fund dividend hikes and strengthen the balance sheet in the future.
Weak Second-Quarter Results
Cimarex reported second-quarter 2020 loss per share of 51 cents, wider than the Zacks Consensus Estimate of a loss of 48 cents. The company reported earnings of 82 cents per share in the year-ago quarter.
Moreover, total revenues of $249.4 million missed the Zacks Consensus Estimate of $295 million and decreased from the year-ago quarter’s $546.5 million.
The weak quarterly results were due to curtailed hydrocarbon production volumes and lower crude price realizations, partially offset by decreased production expense.
Cimarex Energy Co Price, Consensus and EPS Surprise
For the quarter under review, total production averaged 254.7 thousand barrels of oil equivalent per day (MBoe/d), down from 274.8 MBoe/d in the year-ago period on considerably lower activities in the Mid-Continent. Output from the basin also declined 19.8% year over year to 68.7 MBoe/d.
Total oil volumes fell to 78 thousand barrels per day (MBbls/d) from 83.4 MBbls/d in the year-ago period. Moreover, natural gas production decreased to 656 MMcf/d from the year-ago level of 665.8 MMcf/d. Also, natural gas liquids (NGL) volumes dropped to 67.4 MBbls/d from the year-ago figure of 80.4 MBbls/d.
Realized Prices
Realized price of crude oil fell from $54.24 per barrel to $19.57 and the same for NGL dropped 42.5% year over year to $7.52. However, realized prices for natural gas rose to 91 cents per thousand cubic feet from 50 cents recorded a year ago.
Costs and Expenses
Overall costs and expenses for the quarter surged to $1,432.4 million from the year-ago level of $397.4 million, primarily due to impairment charges. Notably, production expense for the second quarter was recorded at $64.3 million, down from the prior-year figure of $89 million.
Financial Condition
As of Jun 30, 2020, the company had cash and cash equivalents of $43.8 million, down from $88.7 million in the first quarter. Net long-term debt was almost $2 billion, representing a net long-term debt to capital of 51.8%. It has no debt maturities in the next four years.
Cimarex's adjusted cash flow from operating activities totaled $144.5 million, down from $336.4 million in the prior-year quarter. The company spent $83.8 million on exploration and development in the June quarter.
Guidance
Cimarex expects average total production for 2020 within 240-250 MBoe/d, indicating a decline from the 2019 level of 278.5 MBoe/d. Full-year 2020 oil production will likely be in the band of 75-78 MBbls/d, suggesting fall from the 2019 figure of 86.2 MBbls/d. For the third quarter, the company expects total output within 230-250 MBoe/d.
Total capital expenditure for the year will likely be $600 million, of which $430 million will be used in drilling and completion, while $40 million will be spent on midstream and saltwater disposal. The improvement in the oil and gas space is expected to help it generate sufficient free cash flow to fund the dividend program even at WTI crude price of $35 per barrel in 2021. Increasing efficiencies in operations will likely enable the company to gain more cash, fund dividend hikes and strengthen the balance sheet.
It expects production expenses for full-year 2020 in the range of $2.90-$3.30 per Boe. Transportation, processing & other expenses will likely be in the band of $2.10-$2.40 per Boe.
Noble Energy’s bottom line for 2021 is expected to surge 61.7% year over year.
EOG Resources’ bottom line for 2021 is expected to soar 281.3% year over year.
Concho Resources’ bottom line for 2020 is expected to rise 35.4% year over year.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
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Why Cimarex (XEC) is on the Rise Despite Q2 Earnings Miss
Despite the announcement of weak second-quarter results on Aug 5, Cimarex Energy Co. has seen 6.2% rise in share price since the release. Investors appreciate the company’s increasing efficiencies in operations, which are expected to enable the firm to generate more cash, fund dividend hikes and strengthen the balance sheet in the future.
Weak Second-Quarter Results
Cimarex reported second-quarter 2020 loss per share of 51 cents, wider than the Zacks Consensus Estimate of a loss of 48 cents. The company reported earnings of 82 cents per share in the year-ago quarter.
Moreover, total revenues of $249.4 million missed the Zacks Consensus Estimate of $295 million and decreased from the year-ago quarter’s $546.5 million.
The weak quarterly results were due to curtailed hydrocarbon production volumes and lower crude price realizations, partially offset by decreased production expense.
Cimarex Energy Co Price, Consensus and EPS Surprise
Cimarex Energy Co price-consensus-eps-surprise-chart | Cimarex Energy Co Quote
Operational Highlights
Production
For the quarter under review, total production averaged 254.7 thousand barrels of oil equivalent per day (MBoe/d), down from 274.8 MBoe/d in the year-ago period on considerably lower activities in the Mid-Continent. Output from the basin also declined 19.8% year over year to 68.7 MBoe/d.
Total oil volumes fell to 78 thousand barrels per day (MBbls/d) from 83.4 MBbls/d in the year-ago period. Moreover, natural gas production decreased to 656 MMcf/d from the year-ago level of 665.8 MMcf/d. Also, natural gas liquids (NGL) volumes dropped to 67.4 MBbls/d from the year-ago figure of 80.4 MBbls/d.
Realized Prices
Realized price of crude oil fell from $54.24 per barrel to $19.57 and the same for NGL dropped 42.5% year over year to $7.52. However, realized prices for natural gas rose to 91 cents per thousand cubic feet from 50 cents recorded a year ago.
Costs and Expenses
Overall costs and expenses for the quarter surged to $1,432.4 million from the year-ago level of $397.4 million, primarily due to impairment charges. Notably, production expense for the second quarter was recorded at $64.3 million, down from the prior-year figure of $89 million.
Financial Condition
As of Jun 30, 2020, the company had cash and cash equivalents of $43.8 million, down from $88.7 million in the first quarter. Net long-term debt was almost $2 billion, representing a net long-term debt to capital of 51.8%. It has no debt maturities in the next four years.
Cimarex's adjusted cash flow from operating activities totaled $144.5 million, down from $336.4 million in the prior-year quarter. The company spent $83.8 million on exploration and development in the June quarter.
Guidance
Cimarex expects average total production for 2020 within 240-250 MBoe/d, indicating a decline from the 2019 level of 278.5 MBoe/d. Full-year 2020 oil production will likely be in the band of 75-78 MBbls/d, suggesting fall from the 2019 figure of 86.2 MBbls/d. For the third quarter, the company expects total output within 230-250 MBoe/d.
Total capital expenditure for the year will likely be $600 million, of which $430 million will be used in drilling and completion, while $40 million will be spent on midstream and saltwater disposal. The improvement in the oil and gas space is expected to help it generate sufficient free cash flow to fund the dividend program even at WTI crude price of $35 per barrel in 2021. Increasing efficiencies in operations will likely enable the company to gain more cash, fund dividend hikes and strengthen the balance sheet.
It expects production expenses for full-year 2020 in the range of $2.90-$3.30 per Boe. Transportation, processing & other expenses will likely be in the band of $2.10-$2.40 per Boe.
Zacks Rank & Stocks to Consider
The company currently has a Zacks Rank #3 (Hold). Some better-ranked players in the energy space include Noble Energy, Inc. , EOG Resources, Inc. (EOG - Free Report) and Concho Resources Inc. , each holding a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Noble Energy’s bottom line for 2021 is expected to surge 61.7% year over year.
EOG Resources’ bottom line for 2021 is expected to soar 281.3% year over year.
Concho Resources’ bottom line for 2020 is expected to rise 35.4% year over year.
Zacks Top 10 Stocks for 2020
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2020?
Last year's 2019 Zacks Top 10 Stocks portfolio returned gains as high as +102.7%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2020 today >>