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Cimarex (XEC) Down 3.2% Since Last Earnings Report: Can It Rebound?

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A month has gone by since the last earnings report for Cimarex Energy (XEC - Free Report) . Shares have lost about 3.2% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Cimarex due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Cimarex Reports Weak Q2 Results on Lower Output & Crude Price

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.

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.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. The consensus estimate has shifted 1030.51% due to these changes.

VGM Scores

At this time, Cimarex has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Cimarex has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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