Cimarex Energy Shows Strong 2007 Performance

Buy-recommended Cimarex (XEC) offers unlevered appreciation potential of 54% to estimated net present value [NPV] of $76 a share, concentrated 65% on natural gas and 35% on oil. Fourth quarter results released on February 20 exceeded expectations with positive surprise in oil volume. In addition, the company apparently received a natural gas price premium rather than a discount to the industry benchmark.

Reserves grew 10% in 2007 after replacing production and before a property sale, thereby demonstrating profitable real growth. Projected volumes along with current futures prices promise a continuing high level of unlevered cash flow (Ebitda). NPV is more than supported by projected cash flow capitalized at unlevered multiples (PV/Ebitda) related to reserve life (Adjusted R/P).

Meanwhile, the industry backdrop continues to be positive with an uptrend for oil price and catch up potential for natural gas.

Originally published on February 20, 2008.