Time To Book Profits In Cimarex Energy Stock?

by Trefis Team
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[Updated 05/24/2021]

In a recent press release, Cimarex Energy (NYSE: XEC) announced an all-stock merger of equals with Cabot Oil & Gas (NYSE: COG). As the oil & gas industry faces an uncertain demand environment due to the pandemic, consolidation is key to superior investor returns and operational efficiencies. Interestingly, the shares of Cimarex Energy are trading 35% above pre-Covid levels and Trefis believes that it is time to book profits as WTI futures indicate a correction in spot prices during the latter half of the year. Moreover, the IEA (International Energy Agency) expects fossil fuel exploration to significantly decline with new policies promoting renewable energy. We highlight the historical trends in revenues, earnings, and stock prices of XEC and COG in interactive dashboards, Buy Or Fear Cimarex Energy Stock? and Buy Or Fear Cabot Oil & Gas Stock?

[Updated 03/29/2021] – Pandemic Blues To Weigh On Cimarex Energy Stock

The shares of Cimarex Energy (NYSE: XEC) surpassed the pre-Covid level of $55 as OPEC announced the extension of production curtailments at its ministerial meeting on March 4. Cimarex is an independent exploration and production company with operations in Texas, New Mexico, and Oklahoma. The company has a flexible cash flow allocation plan for 2021 given the uncertain demand environment due to short-term spikes in coronavirus cases in the U.S. and other countries. Due to the recently introduced restriction measures in Europe, high commercial crude oil inventory levels in the U.S., and EIA’s expectation of lower benchmark prices during the latter half of the year, Trefis believes that the stock has reached its near-term potential. We highlight the historical trends in revenues, earnings, and stock prices in an interactive dashboard analysis on Buy Or Fear Cimarex Energy Stock?

Asset impairments slashed the company’s asset base by 35%

Cimarex Energy’s revenues declined by 33% from $2.3 billion in 2018 to $1.6 billion in 2020 as the pandemic led to a slump in demand and drove down benchmark prices. While the earnings margin fell into negative territory due to a $1.6 billion impairment charge, the company’s balance sheet shrunk by 35% in 2020. Improvement in the company’s finances largely depends on global crude oil demand and supply constraints by the OPEC. With oil majors including Exxon Mobil, Chevron, BP, and Royal Dutch Shell also registering sizable impairment charges, we expect oil demand to recover gradually in the post-pandemic period.

Industry Outlook

Brent and WTI benchmarks crossed the $60/bbl mark in the past month due to the extension of OPEC’s mandatory production cuts. The ending stocks of crude oil and other petroleum products in the U.S. are yet to reach pre-Covid levels as travel demand rebounds and the vaccination rate picks up. EIA expects the WTI benchmark to average around $50/bbl in 2021, negatively affecting revenues and margins of upstream companies. While supply-side constraints have supported benchmark prices, the demand-related factors including the emergence of another coronavirus wave in Europe and a slow vaccination rate in emerging economies might remain a deterrent.

Is there a better alternative to Cimarex Energy? Cimarex Energy Stock Comparison With Peers summarizes how XEC compares against peers on metrics that matter. You can find more such useful comparisons on Peer Comparisons.

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