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Cimarex (XEC) Q4 Earnings Top Estimates, Proved Reserves Grow

Zacks Equity Research
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Cimarex Energy Co XEC reported fourth-quarter 2018 earnings per share of $1.98, which surpassed the Zacks Consensus Estimate of $1.75 and improved from the year-ago $1.47.    

Total revenues of $624.1 million exceeded the Zacks Consensus Estimate of $615 million. The figure also beat $551 million registered in fourth-quarter 2017.

The strong fourth-quarter results were aided by an increase in oil equivalent production backed by ramped up activities in the Permian Basin and Mid-Continent.

Dividend Hike

The company’s board of directors has given authorization to increase the quarterly dividend by 11% to 20 cents per share sequentially. The new dividend is likely to be paid on May 31, to shareholders of record as of May 15.

Operational Highlights

In the quarter under review, total production averaged 251.3 thousand barrels of oil equivalent (MBOE) per day, up 25.2% year over year, thanks to higher activities in the Permian Basin and Mid-Continent.

Oil volumes rose 29.4% to 79.9 thousand barrels per day (MBbls/d) on a year-over-year basis. Moreover, natural gas volumes increased 16.5% to 621.9 MMcf/d year over year. Natural gas liquids (NGL) volumes jumped 35.5% year over year to 67.7 MBbls/d.

With realized prices for natural gas declining 16.3% to $2.16 per thousand cubic feet, the same for crude oil and NGL fell 4.6% and 20% year over year to $49.30 per barrel and $20.71 per barrel, respectively.        

Through the December quarter, this upstream energy player brought online 86 gross wells.   

Financial Condition

As of Dec 30, 2018, the company had cash and cash equivalents of $800.7 million. Net long-term debt was roughly $1.5 billion, which represents a debt-to-capitalization ratio of almost 31%.

Cimarex's cash flow from operating activities, adjusted, totaled $428.2 million, up from $357.1 million in the prior-year quarter. The company spent $373.6 million on exploration and development in the fourth quarter.  

Proved Reserves Grow

The company reported proved reserves — as of Dec 31, 2018 — of 591,195 MBOE, up from 559,037 MBOE as of Dec 31, 2017.

Guidance

Cimarex projects total daily production for the March quarter of 2019 in the range of 245-257 MBoE. Of this, oil production is projected in the band of 75-81 MBbls/d. Daily production for 2019 is estimated in the range of 250-270 MBoE.

For 2019, the company projects capital spending between $1.4 billion and $1.5 billion on exploration & development activities.

Zacks Rank and Key Picks

Currently, Cimarex carries a Zacks Rank #3 (Hold). Meanwhile, better-ranked players in the energy space include Jones Energy Inc. JONE, Golar LNG Partners LP GMLP and Sunoco LP SUN. Jones and Golar LNG carry a Zacks Rank #2 (Buy), while Sunoco sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Jones Energy expects 2019 earnings growth of 19% year over year.

Golar LNG has average positive earnings surprise of 92.8% for the preceding four quarters.

Sunoco LP has average positive earnings surprise of 18.39% for the trailing four quarters.

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