DENVER, Nov. 6, 2018 /PRNewswire/ --
- Daily production averaged 218.6 MBOE; oil production averaged 63,909 barrels per day
- 2018 capital guidance unchanged; targeting mid point
- Fourth quarter oil production expected to average 73.0 - 78.0 MBbls per day
Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2018 net income of $148.4 million, or $1.56 per share, compared to $91.4 million, or $0.96 per share, in the same period a year ago. Third quarter adjusted net income (non-GAAP) was $189.6 million, or $1.99 per share, compared to third quarter 2017 adjusted net income (non-GAAP) of $103.6 million, or $1.09 per share1. Net cash provided by operating activities was $453.5 million in the third quarter of 2018 compared to $251.0 million in the same period a year ago. Adjusted cash flow from operations (non-GAAP) was $388.7 million in the third quarter of 2018 compared to $283.9 million in the third quarter a year ago1.
On August 31, Cimarex closed on the previously announced transaction for the sale of its Ward County assets for $544.5 million. Reported production volumes for the third quarter reflect this closing date.
Total company volumes for the quarter averaged 218.6 thousand barrels of oil equivalent (MBOE) per day. Oil production averaged 63,909 barrels (bbls) per day, up 13 percent from the same period a year ago (17 percent on a pro forma basis) and up four percent from second quarter 2018 levels (eight percent on a pro forma basis). Driven by the 80 wells expected to be brought on production in the second half of 2018 (including 46 wells brought on production in the third quarter) and pro forma for the sale of assets in Ward County, Texas, Cimarex continues to expect oil production growth of 21-23 percent year-over-year. (See Pro Forma Production Reconciliation table below.)
Realized oil prices averaged $58.25 per barrel, up 31 percent from the $44.38 per barrel received in the third quarter of 2017. Realized natural gas prices averaged $1.84 per thousand cubic feet (Mcf) down 31 percent from the third quarter 2017 average of $2.65 per Mcf. NGL prices averaged $25.72 per barrel, up 19 percent from the $21.63 per barrel received in the third quarter of 2017 and up 15 percent sequentially. Realized prices for 2018 reflect the adoption of Accounting Standards Codification 606 (ASC 606). See table below (Impact of ASC 606) for comparison of realized prices for 2018 for pre- and post-ASC 606.
Both oil and natural gas prices were negatively impacted by local price differentials. Our realized Permian oil differential to WTI Cushing averaged $(14.34) per barrel in the quarter, compared to $(8.05) per barrel in the second quarter of 2018 and $(4.06) per barrel in the third quarter of 2017. Cimarex's average differential on its Permian natural gas production was $(1.25) per Mcf below Henry Hub in the third quarter of 2018 compared to $(0.29) per Mcf lower in the third quarter of 2017. In the Mid-Continent region, realized gas prices were $(0.94) per Mcf below the Henry Hub index versus $(0.38) per Mcf below Henry Hub in the third quarter of 2017.
Cimarex invested $501 million in exploration and development (E&D) during the third quarter, of which $400 million is attributable to drilling and completion activities. Third quarter investments were funded with cash flow from operations and cash on the balance sheet. Total debt at September 30, 2018 consisted of $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $864 million. Debt was 33 percent of total capitalization2.
2018 Outlook
Fourth quarter 2018 production volumes are expected to average 238 - 247 MBOE per day with oil volumes estimated to average 73.0 - 78.0 MBbls per day, or 29 - 38 percent higher than the pro forma fourth quarter 2017 average. The total 2018 daily production volumes are now expected to average 218 - 221 MBOE per day with annual oil volumes estimated to average 66.0 - 67.2 MBbls per day.
On a pro forma basis (excluding Ward volumes entirely), Cimarex expects 2018 total production (MBOE per day) and oil production (barrels per day) to grow 17-18 percent and 21-23 percent over 2017 volumes. See Pro Forma Production Reconciliation table below.
Pro Forma Production Reconciliation | |||||||||
(excludes Ward volumes for all periods) | |||||||||
2018E | 2017 | % Growth | |||||||
Daily Production (MBOE/d) | 213 | - | 216 | 183.1 | 17-18% | ||||
Daily Oil Production (MBbls/d) | 62.6 | - | 63.8 | 51.8 | 21-23% | ||||
Estimated 2018 exploration and development investment is $1.6 – 1.7 billion, unchanged. from original guidance given in February.
Expenses per BOE of production for the fourth quarter of 2018 are estimated to be:
Production expense | $3.35 - 3.80 | |
Transportation, processing and other expense* | 2.40 - 3.00 | |
DD&A and ARO accretion | 7.00 - 7.60 | |
General and administrative expense | 1.10 - 1.40 | |
Taxes other than income (% of oil and gas revenue) | 5.75 - 6.25% | |
*Reflects adoption of ASC 606 (see Impact of ASC 606 table below). | ||
Operations Update
Cimarex invested $501 million in E&D during the third quarter, 74 percent in the Permian Basin and 26 percent in the Mid-Continent. Cimarex brought 120 gross (46 net) wells on production during the quarter. At September 30, 98 gross (41 net) wells were waiting on completion. Cimarex currently is operating 16 drilling rigs.
WELLS BROUGHT ON PRODUCTION BY REGION | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Gross wells | ||||||||||||
Permian Basin | 40 | 29 | 89 | 65 | ||||||||
Mid-Continent | 80 | 48 | 174 | 133 | ||||||||
120 | 77 | 263 | 198 | |||||||||
Net wells | ||||||||||||
Permian Basin | 26 | 16 | 48 | 42 | ||||||||
Mid-Continent | 20 | 14 | 36 | 32 | ||||||||
46 | 30 | 84 | 74 | |||||||||
Permian Region
Production from the Permian region averaged 120,822 BOE per day in the third quarter, a 15 percent increase from third quarter 2017 (19 percent on a pro forma basis). Oil volumes averaged 49,001 barrels per day, a 12 percent increase from third quarter 2017 (17 percent on a pro forma basis).
Cimarex completed 40 gross (26 net) wells in the Permian region during the third quarter. There were 45 gross (32 net) wells waiting on completion at September 30.
In Lea County, New Mexico, Cimarex is pleased to announce results from five new wells including the Red Hills Unit 17H, a long lateral Upper Wolfcamp well that had average peak 30-day initial production of 5,164 BOE (3,611 barrels of oil) per day. Cimarex drilled three additional 10,000-foot lateral wells in the Red Hills area on the Vaca Draw 20-17 lease including one well in each of the Avalon, Leonard and Upper Wolfcamp formations (see company presentation for details). A 5,000-foot lateral in the Third Bone Spring was brought on line in Northern Lea County that had a 30-day initial production rate of 2,638 BOE (2,165 barrels of oil) per day.
Cimarex currently is operating 12 drilling rigs and three completion crews in the region.
Mid-Continent Region
Production from the Mid-Continent averaged 97,346 BOE per day for the third quarter, up 14 percent from third quarter 2017 and up ten percent sequentially.
During the third quarter, Cimarex completed 80 gross (20 net) wells in the Mid-Continent region including multi-well pads at the Steve-O Meramec development (six wells) and the Shelly (eight wells) and J.D. Hoppinscotch (four wells) spacing pilots in the Woodford formation in the Lone Rock area. At the end of the quarter, 53 gross (9 net) wells were waiting on completion. Cimarex currently is operating four drilling rigs and one completion crew in the region.
Production by Region
Cimarex's average daily production and commodity price by region is summarized below:
DAILY PRODUCTION BY REGION | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||
Permian Basin | ||||||||||||
Gas (MMcf) | 239.4 | 217.9 | 239.3 | 212.9 | ||||||||
Oil (Bbls) | 49,001 | 43,735 | 49,211 | 43,544 | ||||||||
NGL (Bbls) | 31,919 | 24,659 | 29,863 | 23,771 | ||||||||
Total Equivalent (BOE) | 120,822 | 104,703 | 118,952 | 102,798 | ||||||||
Mid-Continent | ||||||||||||
Gas (MMcf) | 317.9 | 296.8 | 303.6 | 292.4 | ||||||||
Oil (Bbls) | 14,755 | 12,846 | 14,149 | 11,937 | ||||||||
NGL (Bbls) | 29,603 | 23,142 | 27,829 | 22,999 | ||||||||
Total Equivalent (BOE) | 97,346 | 85,451 | 92,569 | 83,676 | ||||||||
Total Company | ||||||||||||
Gas (MMcf) | 558.8 | 515.9 | 544.4 | 506.7 | ||||||||
Oil (Bbls) | 63,909 | 56,687 | 63,586 | 55,596 | ||||||||
NGL (Bbls) | 61,560 | 47,840 | 57,748 | 46,806 | ||||||||
Total Equivalent (BOE) | 218,595 | 190,518 | 212,069 | 186,858 | ||||||||
AVERAGE REALIZED PRICE BY REGION | ||||||||||||
Three Months Ended | Nine Months Ended | |||||||||||
2018* | 2017 | 2018* | 2017 | |||||||||
Permian Basin | ||||||||||||
Gas ($ per Mcf) | 1.66 | 2.70 | 1.79 | 2.78 | ||||||||
Oil ($ per Bbl) | 55.16 | 44.14 | 58.24 | 45.33 | ||||||||
NGL ($ per Bbl) | 27.53 | 20.58 | 23.95 | 18.50 | ||||||||
Mid-Continent | ||||||||||||
Gas ($ per Mcf) | 1.97 | 2.61 | 2.01 | 2.85 | ||||||||
Oil ($ per Bbl) | 68.42 | 45.21 | 64.82 | 45.33 | ||||||||
NGL ($ per Bbl) | 23.75 | 22.75 | 21.77 | 21.70 | ||||||||
Total Company | ||||||||||||
Gas ($ per Mcf) | 1.84 | 2.65 | 1.92 | 2.82 | ||||||||
Oil ($ per Bbl) | 58.25 | 44.38 | 59.70 | 45.33 | ||||||||
NGL ($ per Bbl) | 25.72 | 21.63 | 22.90 | 20.07 | ||||||||
*Realized prices for 2018 reflect the adoption of ASC 606. See Impact of ASC 606 table for a comparison of 2018 realized prices on a pre- and post-ASC 606 basis. |
Other
The following table summarizes the company's current open hedge positions: