Cabot-Cimarex merger puzzles both analysts and investors By David Wethe on 5/24/2021
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HOUSTON (Bloomberg) Shale investors have been demanding more consolidation in the oil patch. But not exactly a deal like this one.
The merger of Cabot Oil & Gas Corp. with Cimarex Energy Co. announced Monday has confounded investors and analysts, leaving them to question the logic behind a tie-up that the companies say will increase diversification. Cimarex is mostly an oil explorer in Texas and Oklahoma, while Cabot is focused on natural gas drilling in the Marcellus shale basin in Appalachia.
Although the two companies are following a path blazed by other shale explorers of late in clinching a deal involving almost no takeover premium, it wasnât enough to win over investors. Shares of both drillers plunged the most on an intraday basis in more than a year.
Cimarex, Cabot Combination ‘Building an Ark, Not a Party Boat’ in Lower 48 Oil, Natural Gas
Cimarex Energy Co. and Cabot Oil & Gas Corp. on Monday agreed to combine in an all-stock merger, tying together their extensive operations in the Marcellus Shale, Permian and Anadarko basins.
Denver-based Cimarex controls 560,000 net acres combined in the Permian and Anadarko, while Houston-based Cabot has 173,000 net acres in the Marcellus. Cabot CEO Dan Dinges has been tapped as executive chairman, while Cimarex chief Tom Jorden would be CEO of the to-be-named company.
The merger is “the start of the next chapter in our histories,” Dinges said. Management has “long understood the long-term benefits of expanding geographically and beyond the Marcellus and adding more scale to our operations.
Operator
Good morning, and welcome to the Cimarex First Quarter 2021 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Megan Hays, Vice President of Investor Relations. Please go ahead.
Megan Hays
Vice President of Investor Relations
Thank you, operator. Hello, everyone, and thank you for joining us today to discuss Cimarex s results for the First Quarter of 2021. Participants on today s call may discuss non-GAAP financial measures. You will find the most directly comparable GAAP financial measures and appropriate reconciliations to those GAAP metrics in our press release, which is available on our website. Also, as a reminder, during today s conference call, we will provide forward-looking statements based on current expectations. I also call your attention to the forward-looking statements, cautionary statements and other disclaimers that are provided in the earnings release and presentation.
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DENVER, May 5, 2021 /PRNewswire/ Cimarex Energy Co. (NYSE: XEC) today reported first-quarter 2021 financial and operating results. Net income for first-quarter 2021 totaled $128.1 million, or $1.25 per share. Net income for the quarter was impacted by a mark-to-market loss on the Company s commodity derivative positions of $99.4 million. Excluding the impact of the mark-to-market loss on commodity derivatives, adjusted net income (non-GAAP) for first-quarter 2021 was $203.7 million, or $1.98 per share.
Highlights
Generated cash flow from operating activities of $403 million.
Adjusted cash flow from operating activities (non-GAAP) totaled $395 million, exceeding capital expenditures and generating $231 million of free cash flow (non-GAAP).
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