It has been about a month since the last earnings report for Cimarex Energy . Shares have added about 37.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cimarex due for a pullback? 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 Beats Q3 Earnings on Higher Natural Gas Prices
Cimarex Energy reported third-quarter 2020 adjusted earnings per share of 51 cents, outpacing the Zacks Consensus Estimate of 21 cents. However, the company reported earnings of 94 cents per share in the year-ago quarter.
Total revenues of $401.7 million beat the Zacks Consensus Estimate of $376 million but decreased from the year-ago quarter’s $582.3 million.
The better-than-expected quarterly results can be attributed to higher natural gas price realizations and lower production expenses, partially offset by decreased overall production and realized crude prices.
Operational Highlights
Production
For the quarter under review, total production averaged 249.4 thousand barrels of oil equivalent per day (MBoe/d), down from 287.1 MBoe/d in the year-ago period on considerably lower activities in the Mid-Continent. Output from the basin also declined 21.9% year over year to 68.8 MBoe/d.
Total oil volumes fell to 71.6 thousand barrels per day (MBbls/d) from 89.7 MBbls/d in the year-ago period. Moreover, natural gas production decreased to 603.4 MMcf/d from the year-ago level of 718 MMcf/d. Also, natural gas liquids (NGL) volumes marginally dropped to 77.3 MBbls/d from the year-ago figure of 77.7 MBbls/d.
Realized Prices
Realized price of crude oil fell from $52.71 per barrel in the prior-year quarter to $37.94. However, the same for NGL increased marginally to $10.89 from $10.80 in the year-ago quarter. Moreover, realized prices for natural gas rose to $1.14 per thousand cubic feet from 88 cents recorded a year ago.
Costs and Expenses
Overall costs and expenses for the quarter surged to $757.4 million from the year-ago level of $409.6 million, primarily due to impairment charges. General and administrative expenses rose to $28.6 million from $15.5 million in the year-ago period. Production expense for the third quarter was recorded at $62 million, down from the prior-year figure of $89.8 million. Also, transportation, processing and other operating costs decreased to $53.1 million from the year-ago figure of $59.8 million.
Financial Condition
As of Sep 30, 2020, the company had cash and cash equivalents of $273 million, up from $43.8 million in the second quarter. Net long-term debt was almost $2 billion, representing a net long-term debt to capital of 56.3%. It has no debt maturities in the next four years.
Cimarex's adjusted cash flow from operating activities totaled $236.7 million, down from $360.7 million in the prior-year quarter. The company spent $80.5 million on exploration and development in the September quarter.
Guidance
Cimarex increased average total production guidance for 2020 to 250-255 MBoe/d. However, the expected range suggests a decline from the 2019 level of 278.5 MBoe/d. Full-year 2020 oil production will likely be in the band of 75.5-77.5 MBbls/d, suggesting fall from the 2019 figure of 86.2 MBbls/d. For the fourth quarter, the company expects total output within 215-235 MBoe/d.
As stated earlier, total capital expenditure for the year will likely be $600 million, of which $430 million will be used for drilling and completion, while $40 million will be spent on midstream and saltwater disposal. The company expects 2020 free cash flow of more than $200 million after dividend payments.
It expects production expenses for full-year 2020 in the range of $2.90-$3.10 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 estimates revision. The consensus estimate has shifted 21.28% due to these changes.
VGM Scores
At this time, Cimarex has an average Growth Score of C, 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 second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. Notably, Cimarex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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Why Is Cimarex (XEC) Up 37.9% Since Last Earnings Report?
It has been about a month since the last earnings report for Cimarex Energy . Shares have added about 37.9% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Cimarex due for a pullback? 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 Beats Q3 Earnings on Higher Natural Gas Prices
Cimarex Energy reported third-quarter 2020 adjusted earnings per share of 51 cents, outpacing the Zacks Consensus Estimate of 21 cents. However, the company reported earnings of 94 cents per share in the year-ago quarter.
Total revenues of $401.7 million beat the Zacks Consensus Estimate of $376 million but decreased from the year-ago quarter’s $582.3 million.
The better-than-expected quarterly results can be attributed to higher natural gas price realizations and lower production expenses, partially offset by decreased overall production and realized crude prices.
Operational Highlights
Production
For the quarter under review, total production averaged 249.4 thousand barrels of oil equivalent per day (MBoe/d), down from 287.1 MBoe/d in the year-ago period on considerably lower activities in the Mid-Continent. Output from the basin also declined 21.9% year over year to 68.8 MBoe/d.
Total oil volumes fell to 71.6 thousand barrels per day (MBbls/d) from 89.7 MBbls/d in the year-ago period. Moreover, natural gas production decreased to 603.4 MMcf/d from the year-ago level of 718 MMcf/d. Also, natural gas liquids (NGL) volumes marginally dropped to 77.3 MBbls/d from the year-ago figure of 77.7 MBbls/d.
Realized Prices
Realized price of crude oil fell from $52.71 per barrel in the prior-year quarter to $37.94. However, the same for NGL increased marginally to $10.89 from $10.80 in the year-ago quarter. Moreover, realized prices for natural gas rose to $1.14 per thousand cubic feet from 88 cents recorded a year ago.
Costs and Expenses
Overall costs and expenses for the quarter surged to $757.4 million from the year-ago level of $409.6 million, primarily due to impairment charges. General and administrative expenses rose to $28.6 million from $15.5 million in the year-ago period. Production expense for the third quarter was recorded at $62 million, down from the prior-year figure of $89.8 million. Also, transportation, processing and other operating costs decreased to $53.1 million from the year-ago figure of $59.8 million.
Financial Condition
As of Sep 30, 2020, the company had cash and cash equivalents of $273 million, up from $43.8 million in the second quarter. Net long-term debt was almost $2 billion, representing a net long-term debt to capital of 56.3%. It has no debt maturities in the next four years.
Cimarex's adjusted cash flow from operating activities totaled $236.7 million, down from $360.7 million in the prior-year quarter. The company spent $80.5 million on exploration and development in the September quarter.
Guidance
Cimarex increased average total production guidance for 2020 to 250-255 MBoe/d. However, the expected range suggests a decline from the 2019 level of 278.5 MBoe/d. Full-year 2020 oil production will likely be in the band of 75.5-77.5 MBbls/d, suggesting fall from the 2019 figure of 86.2 MBbls/d. For the fourth quarter, the company expects total output within 215-235 MBoe/d.
As stated earlier, total capital expenditure for the year will likely be $600 million, of which $430 million will be used for drilling and completion, while $40 million will be spent on midstream and saltwater disposal. The company expects 2020 free cash flow of more than $200 million after dividend payments.
It expects production expenses for full-year 2020 in the range of $2.90-$3.10 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 estimates revision. The consensus estimate has shifted 21.28% due to these changes.
VGM Scores
At this time, Cimarex has an average Growth Score of C, 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 second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. 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. Notably, Cimarex has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.