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Cimarex's Resolute Energy Acquisition to Add to March Output

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Cimarex Energy Co. (XEC - Free Report) recently announced that the company has closed the $1.6 billion cash-and-stock acquisition deal with Resolute Energy Corporation. Notably, Cimarex had issued around 5.7 million common shares for former shareholders of Resolute Energy. It also paid $325.6 million in cash.

Additionally, Cimarex announced that it is committed to achieve cashflow neutrality (after paying dividends) in 2019, with an assumed oil price of $52.50 per barrel.

The Resolute Energy acquisition, effective Mar 1, 2019, is anticipated to add 28,000 barrels of oil equivalent per day (BOED) of production (52.9% oil) to total output in March. For 2019, the company expects overall production to rise 18%, with oil output expected to increase 23%. It expects overall output to average 250,000-270,000 BOED in 2019. Including the effects from the acquisition, production in first-quarter 2019 is expected within the range of 245,000-257,000 BOED.

The strategic acquisition is expected to lead to significant commercial, financial and operational synergies, courtesy of integration of assets and systems. Cimarex holds about 94.4% stake in the combined entity, following the closing of the deal. The move is expected to be a prudent one as the deal is likely to be accretive to the company’s earnings and non-GAAP cash flow. The agreement added around 21,100 net acres of Reeves County acreage to Cimarex’s Permian portfolio, expanding its position by 34% to a total of 83,158 acres.

Notably, in 2019, the company plans to invest $1.1-$1.2 billion for drilling and completion of 83 net wells, of which 66 are from the Permian Basin. As a result, around 85% of its total drilling and completion capital will be directed toward the Permian Basin.

Price Performance

Cimarex has lost 22.9% in the past year compared with 23.8% collective decline of its industry.

Zacks Rank and Stocks to Consider

Currently, Cimarex carries a Zacks Rank #3 (Hold). Investors interested in the energy sector can opt for some better-ranked stocks as given below:

Austin, TX-based Jones Energy, Inc. (JONE - Free Report) is an exploration and production company. For 2019, its bottom line, which has witnessed one upside revision over the past 60 days, is expected to grow 19% year over year. The company currently holds a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Denver, CO-based Antero Resources Corporation (AR - Free Report) is an upstream energy company. Its top line for 2019 is expected to increase 11.8% year over year. The stock currently has a Zacks Rank #2.

Enbridge Inc. (ENB - Free Report) is a Calgary, Canada-based energy infrastructure provider. The company delivered average positive earnings surprise of 31.8% in the trailing four quarters. It currently has a Zacks Rank #2.

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