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Another day, and another oil company with a share price that is off to the races. This time it is US oil explorer Cimarex Energy (NYSE:XEC), which is seeing heavy buying in the last few sessions in New York.

Denver-based Cimarex has a market cap of $7.36bn. Shares were down at $53 on 20 August but since then the stock has been on the move, and closed last week at 71.55. The stock is already close to an established ATH of 76, but bear in mind this one could have been had for around $25 a year ago!

Fast evaporating buying opportunity

Cimarex stock had in fact come off slightly since mid-July, creating a buying opportunity for punters who wanted to get in. That opportunity seems to be fast disappearing however, as the stock closes on its July trading band.

But that aside, Cimarex has been creating a lot of interest among US oil investors ever since the start of the pandemic. It has been as expensive as 135 if you go back five years, so there is further scope for gains here.

Cimarex was created in 2002 when it was spun off from Helmerich & Payne and then merged with Key Production. It has operations throughout the southern and central US, including in the Permian Basin, Woodford Shale and Meramec Horizon.


Cimarex Energy Q2 results

Cimarex Energy released its Q2 results on 5 August. It showed net income of $113.4m ($1.10/share), although it did take a mark-to-market loss of $125.7m on commodity derivatives positions. Excluding that, net income (non-GAAP) was $215.6m. Cash flow from operating activities was $364m.

During that period the company merged with Cabot Oil & Gas, giving it further scale – the transaction is believed to be proceeding on track, and is expected to close in Q4.

As the oil price picks itself back off the floor it reached in 2020, so Cimarex revenues are improving. The company’s average realised price for oil, natural gas and NGLs in Q2 was $32.38 per BOE. That compares with $10.32 per BOE for the same period in 2020. That’s a good demonstration of how the fortunes of US oil firms are changing.

What are the analysts saying?

The stock is getting plenty of love from the Wall Street analyst community: Evercore ISI has rated it an outperform, with a 75 price target; Mizuho has raised it from neutral to a buy with an increased target price set at $89, possibly as high as $95, and Truist Securities has the company at a buy (up from hold on 21 July), with a target range of between 70-80 bucks.

It should also be noted that Cimarex is a primarily onshore explorer and producer and is less exposed to the regular disruptions we are seeing from hurricanes in the Gulf of Mexico. The company invested more than $500m in its operations in the Permian and Mid-Continent regions in 2020. It has proven reserves of 531m barrels of oil equivalent (December 2020).

Daily production averaged 252.2 thousand barrels of oil equivalent during 2020, of which 42% was natural gas, 30% oil, and a further 28% was natural gas liquids. In 2020 alone the company brought 51 well online.

Related

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Please note this article does not constitute investment advice. Investors are encouraged to do their own research beforehand or consult a professional advisor.

Stuart Fieldhouse

Stuart Fieldhouse

Stuart Fieldhouse has spent 25 years in journalism and marketing, including as a wealth management editor for the Financial Times group, covering capital markets and international private banking, and as an investment banking correspondent for Euromoney in Hong Kong. He was the founder editor of The Hedge Fund Journal.

Stuart has worked at CMC Markets, supporting the re-launch of its global financial spread betting and CFD trading platforms. He is also the author of two books on trading, published by Financial Times Pearson. Based in The Armchair Trader’s London office, Stuart continues to advise fund managers, private banks, family offices and other financial institutions.

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