Denver-based Cimarex Energy Co. is exploring opportunities to pick up additional interest in the Anadarko Basin at a discount as other operators are buckling under budgetary discipline and underperformance in the play, management said Tuesday in a conference call to discuss third quarter earnings.
“Certainly there's a lot less activity within the whole STACK play,” said John Lambuth, senior vice president of exploration, referring to the Sooner Trend of the Anadarko Basin, mostly in Canadian and Kingfisher counties. “Quite a few operators who, to stay within that budget, they are getting out from a nonoperating perspective. So we've done very well in picking out some of the additional interests.”
Cimarex has seen similar opportunities to grow inventory in the Permian Basin’s Delaware sub-basin.
“Because so many of our competitors are tasked with living within their cash flow, there are a lot of operators that are looking to sell nonoperated interest … they only have the cash flow to participate in their own operator properties,” said CEO Tom Jorden. “So we've had some pretty good opportunities in the Anadarko and in the Delaware basin to pick up additional interest in some of our projects at costs that, quite frankly, we haven't seen in years.”
Speaking to capital expenditure (capex) allocations for Midcontinent operations, Jorden said that despite a clear weighting toward Permian operations, there is interest in seizing the chance to build inventory amid discounted asset offers.
“We'd like to just beef up that asset and have it compete longer term,” Jorden said.
“We're putting a lot of effort to not just looking across our existing acre positions that we have,” but also to look beyond them as “there are opportunities now and we're just looking for...those opportunities where we think we have maybe an advantage...and bring forth things that would compete for capital” at a reasonable cost, said Lambuth.
The interest in scooping up assets in the Anadarko Basin is slightly outside the script management laid out in February, which emphasized its capex reductions and pivot to the Permian.
Cimarex also referred to the increasing amount of private equity looking to seize discounted assets in the Permian and Anadarko in affirming the trend of opportunistic buying taking place.
“Private equity is highly attuned to this opportunity and the number of private equity players are actively soliciting relationships where they will pick up this nonoperated interest if operators don't want to participate,” said Jorden. “It's a change in our business, we wouldn't have seen this a few years ago.”
Cimarex’s Midcontinent production in the third quarter totaled 88,100 boe, up by 3% sequentially but down by 10% from the year-ago period. The year/year drop was driven mostly by a decline in gas and natural gas liquids (NGL) production.
Where Cimarex beat guidance and outperformed was in its Wolfcamp operations in the Permian. Total Permian production, the majority of which is in Culberson County, TX, reached 198,600 boe, a 5% sequential increase and a 64% year/year increase.
Cimarex boosted its year/year oil production in both plays, by less than 1% in the Midcontinent to 14,788 bbl, and up by 52% in the Permian to 74,891 bbl.
The company reported a net income of $40.5 million (39 cents/share) for the third quarter, down from $148.4 million ($1.56) in 3Q2018.