Cimarex Energy Makes a Timely Turn to Oil

An improving volume trend, especially for oil, may rekindle investor interest in what we see as unlevered appreciation potential of 72% in buy-recommended Cimarex (XEC) to estimated net present value [NPV] of $76 a share. Third quarter results reported today show how the company is positioned for record unlevered cash flow (Ebitda) in the quarters ahead.

Stable overall volume masks a surprise upward trend in oil volume for a company mostly concentrated on natural gas. At the same time, positive trends in the longer life Midcontinent and Permian areas have been masked by a lessening emphasis on the shorter life Gulf Coast and Gulf of Mexico areas.

Meanwhile, NPV is well supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P). Accentuating the timely emphasis on oil, a renewed rise in oil price may take six-year futures to another double as was the case from the end of 2004 to mid 2006, subject to short declines from time to time. Natural gas, the best alternative clean fuel selling at a discount, ought to respond as well, eventually.

Originally published on November 7, 2007.

Comments

[timski:]

More useless "analysis" by Mr Wulff. How can I block any posts of this guy's fluff????

2007 Dec 22 01:36 PM