February 17, 2010 / 7:54 PM / 8 years ago

UPDATE 3-Cimarex Q4 earnings beat Street; ups production view

* Q4 EPS $1.23 vs est of $0.99

* Q4 revenue up 10 percent

* Sees Q1 production of 560-575 mmcfed * Shares reach 17 month high

* Co benefits from new SEC rules (Adds analyst comments, details, updates share movement)

By Arup Roychoudhury

BANGALORE, Feb 17 (Reuters) - Independent oil and gas company Cimarex Energy Co (XEC.N) reported a fourth-quarter profit that beat analysts’ estimates, helped by an increase in oil and gas prices, and raised its first-quarter and 2010 production outlook, sending its shares up almost 5 percent to 17 month high.

The company raised its first-quarter production outlook by about 9 percent to 560 to 575 million cubic feet equivalent per day (mmcfed) and also upped its full-year forecast to 540 to 570 mmcfed, citing accelerating production in its southeast Texas and Cana-Woodford shale assets.

“I think it underscores the strong position the company finds itself in having great success in southeast Texas, and that can translate into strong 2010,” UBS analyst Andrew Coleman said by phone.

Pritchard Capital analyst Raymond Deacon said he expected the company to meet its 2010 targets.

“These guys have never missed numbers, it is probably the most conservative company in the group. I think they are in great shape,” Deacon said.

For the latest fourth quarter, Cimarex’s net income was $104.6 million, or $1.23 per share, compared with a loss of $1.06 billion, or $13.01 per share, a year earlier. [ID:nWNAB8074]

Production for the quarter averaged 476 mmcfed, up 6 percent sequentially.


Cimarex said its proved reserves grew 15 percent to 1.53 trillion cubic feet equivalent (tcfe) at the end of 2009 and that reserves added totalled 312 billion cubic feet equivalent (Bcfe), replacing 185 percent of production.

Replacement rate is a measure of growth in production. A rate below 100 percent indicates a company is shrinking by finding fewer new fields to offset oil or gas it is pumping.

Companies like Newfield and Cimarex, and their larger peers Devon Energy (DVN.N) and Chesapeake Energy (CHK.N) took advantage of new reserve reporting rules from the U.S Securities and Exchange Commission — the first changes in 30 years — providing more flexibility in allowing reserves to be reported. [ID:nN17125542]

To be classified as proved reserves, companies must list reservoirs that can be produced using currently available technology at recent energy prices, allowing companies to add more undrilled locations to their reserve.

“Everybody is booking either three or four times as many reserves per well with the new SEC rule. But my guess in 2010 is they (Cimarex) should be able to replace production at least 150 percent,” said analyst Deacon.

On Tuesday, larger peer Newfield Exploration Co (NFX.N) said it replaced about 250 percent of 2009 production with addition of new proved reserves. [ID:nWEN0285] [ID:nWEN0284]


Shares of Newfield, which posted quarterly profit that beat estimates, were down as much as 9 percent on what analysts say was a lack of “spectacular” well results, which had served as catalysts.

“Stock has been a remarkable performer year-to-date and I think expectations had built ahead of actual catalysts and so in the absence of new drilling catalysts, stock is down,” Jefferies and Co analyst Subash Chandra said.

Chandra added that although there was no particular bad news, most of what Newfield announced was unremarkable and was factored in.

Canaccord Adams analyst Irene Haas said the market was expecting too much from the company a little too early.

“The last two or three quarters, they have had good catalysts so people going into this earnings release probably had high expectations,” Haas said.

Shares of Newfield, which have more than doubled in value over the past one year, fell 9 percent to $47.92 before paring losses to trade down $2 at $50.71 at Wednesday afternoon.

Shares of Cimarex, rose 5 percent to $59.41, their highest since July 2008, before paring gains to trade up 3 percent at $58.52 Wednesday afternoon on the New York Stock Exchange. (Reporting by Arup Roychoudhury in Bangalore; Editing by Maju Samuel and Anil D’Silva)

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