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Chevron (NYSE:CVX) has been a core holding in my portfolio since October of last year when it was trading at $90 a share. It has been a solid if not spectacular performer since then, especially taking into account its dividend payouts over that time period. It was with reluctance that I traded out of this core holding and rolled some of the cash received into Cimarex Energy (NYSE:XEC). Both reported earnings today and it appears the two energy concerns are heading in different directions and I currently like the risk/reward equation for Cimarex Energy better at this point at this time.

Key lowlights from Chevron's earnings report:

  • EPS came in at $2.69, 20 cents light of estimates. This is the third quarter of the last four that have missed estimates.
  • Revenue fell to $55.66 billion from $61.26 billion in same period in 2011. This missed estimates by almost $6B.
  • Chevron's net production totaled 2.52 million barrels per day worldwide, a decrease of 3 percent from a year ago.
  • Note: Chevron also announced this week that it is having problems with its Angola's production capacity.

Cimarex Energy Co. is as an independent oil and gas exploration concern with productive acreage in Texas, Oklahoma, New Mexico, and Kansas.

  • Key highlights from Cimarex's earnings report:
  • EPS of 97 cents came in two cents better than estimates.
  • Revenue also beat consensus estimates by 3% and came in at approximately $407mm.
  • The company is making progress to increasing its oil ratio of overall production. Oil production grew 23% to a record 32,456 barrels per day. Permian Basin oil production grew 42% to 25,000 barrels per day.

4 additional reasons XEC has upside from $61 a share:

  1. Consensus earnings estimates for FY2012 and FY2013 had already risen in the last months after falling for several months. I would expect estimates to tick up further on the strength of today's earnings report.
  2. Realized natural gas price fell 39% to $2.79 per thousand cubic feet (MCF) in the recently reported quarter. NG prices are some 25% higher currently which should start to slowly flow to the top and the bottom lines. Just over 50% of the company's production is natural gas currently.
  3. The stock is cheap at under five times operating cash flow (OCF). OCF has increased more than 80% in the last three years.
  4. The median price target on the shares is $72 a share. The stock is selling at less than 12 times forward earnings and analysts project more than 20% revenue growth in FY2013.

Disclosure: I am long XEC. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Source: Why I Sold My Chevron Position To Establish A Stake In Cimarex Energy Today