Cimarex Energy Reports Second-Quarter Financial Results
biz.yahoo.com
Monday August 8, 7:00 am ET
DENVER, Aug. 8 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC) today announced results from operations for the quarter ended June 30, 2005.
As previously reported, Cimarex completed the acquisition of Magnum Hunter Resources, Inc. on June 7, 2005. Financial results for the second quarter of 2005 include results of operations from the acquired assets for 23 days. Expenses related to the merger recorded in the second quarter of 2005 totaled $6.7 million, or $4.3 million after-tax ($0.08 per share). Cimarex also recorded a loss on derivative instruments related to the commodity swaps and collars assumed in the merger of $2.0 million, or $1.3 million after-tax ($0.02 per share).
Including items related to the merger, net income for the second-quarter 2005 was $52.5 million, or $0.98 per diluted share. This compares to second quarter 2004 earnings of $36.5 million, or $0.85 per diluted share.
F.H. Merelli, Chairman and CEO of Cimarex, said, "We are pleased to have the Magnum Hunter merger closed. We look forward to integrating the properties and applying our drilling-focused approach to these assets."
Revenues from oil and gas sales rose 60% in the second quarter of 2005 to $185.0 million, compared to $115.3 million in the same period of 2004. Second quarter 2005 cash flow from operations totaled $132.7 million, versus $84.5 million in the same period of 2004(1).
For the six month period ended June 30, 2005, Cimarex reported net income of $95.8 million, or $1.98 per diluted share, up from $66.3 million, or $1.56 per diluted share, for the comparable period of 2004.
Oil and gas sales for the first half of 2005 totaled $322.4 million, up from $210.8 million during the corresponding period of 2004. Cash flow from operations for the first six months of 2005 increased to $233.3 million from $152.3 million during the first half of 2004(1).
The increases in oil and gas revenues, earnings and cash flow are due to higher oil and natural gas prices and record production volumes. The increase in production is attributable to the addition of Magnum Hunter operations during the second quarter and continued positive drilling results.
(1) Cash Flow from Operations is a non-GAAP financial measure that
represents Net Cash Provided By Operating Activities adjusted for
the change in operating assets and liabilities. See below for a
reconciliation of the related amounts.
Production Volumes
Total daily production volumes averaged 295 million cubic feet (MMcf) equivalent during the second quarter of 2005 versus 220 MMcf equivalent a year earlier. Cimarex's reported results include Magnum Hunter's production for the period after the June 7, 2005 merger, or 23 days of the second quarter. Magnum Hunter production averaged 243.7 MMcfe per day in June, which added 5.6 Bcfe to Cimarex's second quarter 2005 volumes. The following table summarizes production volumes for Cimarex and Magnum Hunter:
Magnum Hunter Cimarex Q2 Volumes
June 23 Days Stand MHR Total
Q2 2005 2005 of June -alone 23 Days Cimarex
Production:
Natural Gas
(Bcf) 15.9 5.1 3.9 17.2 3.9 21.1
Oil and NGL
(Mbbls) 1,122.6 363.2 278.5 668.1 278.5 946.6
Equivalent
(Bcfe) 22.6 7.3 5.6 21.2 5.6 26.8
Avg. Daily
Production:
No. of Days 91 30 23 91 91 91
Natural Gas
(MMcf/d) 174.6 171.1 171.1 189.1 43.2 232.3
Oil and NGL
(Mbbl/d) 12.3 12.1 12.1 7.3 3.1 10.4
Equivalent
(MMcfe/d) 248.6 243.7 243.7 233.2 61.5 294.7
The oil and natural gas swaps and collars assumed as part of the Magnum Hunter acquisition are not considered effective hedges under SFAS 133. The mark-to-market value of the derivative instruments is included in losses on derivative instruments in the income statement. For the second quarter of 2005 Cimarex recorded a loss on derivative instruments of $2.0 million, or $1.3 million after-tax ($0.02 per share).
Second-quarter 2005 costs and expenses directly associated with exploration and production activities totaled $86.8 million versus $52.5 million during the second quarter of 2004. The increase in cost and expense is primarily a result of the Magnum Hunter acquisition. The largest components of the increase are a $20.7 million rise in depreciation, depletion and amortization, and $8.0 million increase in production expense. Production taxes also grew by $4.1 million due to higher revenues.
Exploration and development (E&D) expenditures during the second quarter of 2005 totaled $141.0 million, up from $81.6 million for the second quarter 2004. Included in second-quarter 2005 expenditures is $32.7 million incurred on Magnum Hunter properties during June. In the second quarter of 2005, we participated in drilling 121 gross wells, with an overall success rate of 93%. On a net basis, 53 of 60 wells drilled during the second quarter were successful.
E&D capital expenditures for the first six months of 2005 were $233.7 million, up from $150.2 million during the first half of 2004. We drilled 180 gross (96 net) wells during the first six months of 2005, realizing a success rate of 89%. Including costs incurred by Magnum Hunter prior to the merger, first-half 2005 E&D expenditures incurred by both companies totaled $375 million.
Outlook
For the second half of 2005, Cimarex's E&D expenditures are projected to total approximately $325 million. Together with first-half spending by Cimarex and Magnum Hunter, total combined 2005 E&D expenditures would equate to approximately $700 million.
Based upon anticipated capital spending and numerous other factors related to production volume forecasts, Cimarex's second-half 2005 aggregate production is expected to range from 475 to 490 MMcfe per day (77% natural gas).
Certain operating expenses for the remainder of 2005 are expected to fall within the following ranges summarized below based upon estimated production.
Operating Expenses ($/Mcfe):
Production expense $0.75 - $0.80
Transportation expense 0.12 - 0.15
Depreciation, depletion and amortization 2.10 - 2.20
General and administrative expense 0.27 - 0.30
Production taxes (% of oil and gas revenue) 7.0% - 7.5%
Conference call and web cast
A conference call with management has been scheduled for 11 a.m. Mountain Time (1 p.m. Eastern), Monday August 8, 2005. Interested parties may access the call by dialing (800) 938-0653 and requesting the Cimarex Energy Co. teleconference. In addition, a listen-only web cast of the call will be provided at www.cimarex.com. Please go to the website at least ten minutes early to register and to download any necessary audio software. |
