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Cimarex Energy (XEC) to Divest Ward County Assets for $570M

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Cimarex Energy Company (XEC - Free Report) has inked a purchase and sale agreement with Callon Petroleum to divest oil and gas properties located in Ward County, TX. The sale is expected toraise cash proceeds of about $570 million.

Production from these properties, majority of which has been derived from the Bone Spring formation, is about 6,831 barrels of oil equivalent per day (73% oil). Net Wolfcamp acreage of about 18,925 is undeveloped. The transaction is likely to close in the third quarter of 2018.

This sale reflects the company’s strategy to consistently upgrade and optimize its portfolio. Cimarex Energy was among the first horizontal operators in the Bone Spring formation in Ward County. The area has delivered good returns over the years.  However, the remaining Wolfcampprospectsrequire more capital compared with other projects.

Cimarex Energy is an independent oil& gas exploration and production firm. The company’s operations are located mainly in Oklahoma, TX and New Mexico. Its exploration and production (E&P) activities are concentrated intwo areas —the Permian Basin and the Mid-Continent region. The Permian region covers west Texas and southeast New Mexico. Cimarex's Permian Basin efforts are located in the western half of the Permian Basin, also known as the Delaware Basin.

For 2018, Cimarex Energy is likely to invest $1.6-$1.7 billion for E&P activities, which is 29% higher than the year-ago period’s level. By 2017, the company completed 98 wells in the Permian Basin and Mid-Continent region.The company has also providedan upbeat production guidance for 2018 in the range of 211-221 thousand barrels of oil equivalent (MBOE) per day. The 2018 guidance reflects an improvement of 14% from the year-ago projections.

Price Performance

During the past three months, Cimarex Energy’s shares have lost 3.5% against the industry’s 11.4% rally.


Zacks Rank & Key Picks

Cimarex Energy currently carries a Zacks Rank #3 (Hold).

A few better-ranked players in the same sector are Nine Energy Service, Inc (NINE - Free Report) , Equinor ASA (EQNR - Free Report) and CVR Refining, LP . All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nine Energy Service is engaged in delivering onshore completion and production services to unconventional oil and gas resource development. The company pulled off a positive earnings surprise of 28.57% in the preceding quarter.

Equinor, based in Norway, is a major international integrated oil and gas company. It witnessed an average positive earnings surprise of 11.53% in the last four quarters.

Sugar Land, TX-based CVR Refining is an independent downstream energy partnership with refining and associated logistics properties in the Midcontinent United States. The company delivered an average positive earnings surprise of 7.05% in the last four quarters.

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