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Cimarex Completes Cana-Woodford Buy, Plans Kansas Leasehold Sale

Cimarex Energy Co. has completed its acquisition of some land in the Cana-Woodford Shale in Western Oklahoma and announced plans to sell producing properties in neighboring Kansas to an undisclosed buyer.

Denver-based Cimarex said it paid QEP Energy Co. $238 million for 50,000 net acres in the Cana-Woodford, adding about 140 Bcfe of proved developed reserves and net production of 35 MMcfe/d.

In May, Cimarex agreed to pay the QEP Resources Inc. unit $497.4 million in cash for Cana-Woodford properties, part of a larger $807 million transaction with other buyers to grab assets in the Midcontinent and the Williston Basin (see Shale Daily, May 7). Cimarex then came to an agreement with Devon Energy Corp. and sold half of the secured acreage in the Cana-Woodford for $248.7 million.

At the time, nearly two-thirds of the reserves being acquired by QEP were reportedly associated with properties in which Cimarex held a working interest.

Cimarex also said Monday it is selling assets in Kansas to an unnamed buyer for $138 million. The assets include 50 Bcfe of proved reserves and 15 MMcfe/d of production. The transaction is expected to close by the end of this month.

In reaction to the transactions, Cimarex adjusted full-year 2014 production guidance to 835-860 MMcfe/d to reflect their impact. The previous figure was 822-847 MMcfe/d.

Topeka Capital Markets (TCM) analyst Gabriele Sorbara on Tuesday reaffirmed a “hold” rating on Cimarex stock and raised the price target to $146.00/share. For the Kansas transaction, TCM lowered its production estimate for 2014 to 847.8 MMcfe/d from 854.1 MMcfe/d. Sorbara said the Kansas transaction implied a fair valuation of $9,200/Mcfe for flowing production and $2.76/Mcfe for proved reserves.

At the beginning of 2014, Cimarex announced plans to spend most of the $1.8 billion earmarked for capital expenditures in the Permian Basin’s Delaware Basin and Wolfcamp Shale (see Shale Daily, Jan. 15). Of that total, the company at that time said it planned to spend $350 million in the Midcontinent, including nearly $250 million in the Cana-Woodford Shale.

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