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Cimarex Cuts 2020 Capex Again, Plans to Curb May Output by 30%

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·3 min read
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Cimarex Energy Co. XEC recently slashed its capital spending plan for the second time. This decision by the company, which made a similar move last month, was triggered by the ongoing market uncertainty.

Climarex had earlier expected 2020 capital investment to be down 40-50% from its original guidance of $1.25-$1.35 billion. However, due to continued drag in oil and gas prices, the company now expects capital spending to be down 55-60% from the original plan. With the coronavirus pandemic wiping out much of the energy demand, market conditions seem gloomy for exploring and producing companies.

Climarex intends to operate with only one rig and drop the rest in the beginning of the next month. It has also postponed completion activities. In its Delaware Basin assets, Climarex paused activities, which helped the company reduce 2020 planned capital investment.

In the production front, it plans to curb output by 30% for the month of May due to low realized commodity prices. If the current conditions persist, the company might not be able to meet the expectations it provided in March of 278,480 barrels of oil equivalent per day, which indicated no change from 2019 production levels.

Cimarex plans to focus on maintaining balance sheet strength to navigate through weak market fundamentals. The company earlier stated that it expects no additional debt this year. As of Dec 31, 2019, the company had net long-term debt of almost $2 billion, which represents a debt-to-capitalization ratio of nearly 37%, below the industry average of 41.7%.

Price Performance

The stock has lost 62.3% year to date compared with 55.5% decline of the industry it belongs to.

Zacks Rank & Stocks to Consider

Currently, Cimarex has a Zacks Rank #5 (Strong Sell). Some better-ranked players in the energy space are Comstock Resources, Inc. CRK, Murphy USA Inc. MUSA and Noble Corporation NE, each having a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Comstock Resources’ 2020 sales are expected to rise more than 33% year over year.

Murphy USA’s 2020 earnings per share are expected to rise 14.7% year over year.

Noble Corp.’s 2020 earnings per share are expected to gain nearly 12% year over year.

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Comstock Resources, Inc. (CRK) : Free Stock Analysis Report
Noble Corporation (NE) : Free Stock Analysis Report
Cimarex Energy Co (XEC) : Free Stock Analysis Report
Murphy USA Inc. (MUSA) : Free Stock Analysis Report
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