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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 its most recent earnings report in order to get a better handle on the important catalysts.

Cimarex Misses Q2 Earnings Estimates on Lower Gas Prices

Cimarex Energy reported second-quarter 2018 earnings of $1.59 per share, which lagged the Zacks Consensus Estimate of $1.64. The figure improved from $1.06 in the year-ago quarter. The upside can be primarily attributed to increase in production and higher liquids price realizations, which was partially offset by lower gas price realizations.

Total Revenues

In the second quarter, Cimarex Energy’s total revenues amounted to $556.3 million and missed the Zacks Consensus Estimate of $559 million. The figure improved from $456.4 million in the year-ago quarter.

Operational Highlights

In the quarter under review, total production averaged 211.4 thousand barrels of oil equivalent (MBOE) per day, up 9.7% year over year. Oil volumes rose 6.5% to 61.6 thousand barrels per day (MBbls/d) on a year-over-year basis, but lagged the Zacks Consensus Estimate of 66 MBbls/d. Natural gas volumes increased 4.4% to 539.5 MMcf on a year-over-year basis and beat the Zacks Consensus Estimate of 535 MMcf. Natural gas liquids (NGL) volumes jumped 22.8% year over year to 59.8 MBbls/d and beat the Zacks Consensus Estimate of 52 MBbls/d.

Realized prices for natural gas declined 41.5% to $1.65 per thousand cubic feet, while crude oil and NGL displayed year-over-year increase of 38.2% and 22.2% to $60.99 per barrel and $22.29 per barrel, respectively.  

The company brought 57 gross (10 net) wells on stream during the quarter. Per the company, a total of 96 gross (25 net) wells were pending completion as of Jun 30.

Financial Condition

As of Jun 30, the company had cash and cash equivalents of $410.8 million. Net long-term debt was $1.5 billion, which represents a debt-to-capitalization ratio of 34%.   

Cimarex Energy's net cash from operating activities during the quarter was $321.2 million compared with $255.3 million in the prior-year quarter. The company spent $375 million for exploration and development during the second quarter, of which $322 million was allocated for drilling and completion activities.

Guidance

Total production for the third quarter of 2018 is projected to average 206-215 MMcfe per day, adjusting for the sale of Ward County assets. Of which, oil production is estimated in the range of 61,500-64,500 barrels per day. Full-year 2018 production is estimated in the range of 214-221MMcfe.

Moreover, Cimarex Energy expects 2018 total production and oil production to rise14-18% and 20-25%, respectively, from the year-ago levels.

The company reiterated capital spending for 2018 between $1.6 billion and $1.7 billion.

 

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -9.23% due to these changes.

VGM Scores

Currently, Cimarex has a nice Growth Score of B, though it is lagging a lot on the Momentum Score front with an F. However, 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 B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. 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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