In a recent press release, Cimarex Energy (NYSE: XEC) announced an all-equity, peer-to-peer merger with Cabot Oil & Gas (NYSE: COG). With the oil and gas sector facing an uncertain demand environment as a result of the pandemic, consolidation is key to achieving superior returns for investors and operational efficiency. Interestingly, Cimarex Energy shares are trading 35% above pre-Covid levels and Trefis believes it is time to record profits as futures on WTI point to a correction in spot prices in the during the second half of the year. In addition, the IEA (International Energy Agency) expects the exploration of fossil fuels to decrease considerably with new policies to promote renewable energies. We highlight historical trends in income, earnings and stock prices of XEC and COG in interactive dashboards, Buy or fear the Cimarex Energy share? and Buy or fear Cabot’s oil and gas stocks?
[Updated 03/29/2021] – The pandemic blues will weigh on Cimarex’s energy stock
Actions of Cimarex Energy (NYSE: XEC) surpassed the pre-Covid level of $ 55 as OPEC announced the extension of production cuts at its ministerial meeting on March 4. Cimarex is an independent exploration and production company operating in Texas, New Mexico and Oklahoma. The company has a flexible cash allocation plan for 2021 given the uncertain demand environment due to short-term spikes in coronavirus cases in the United States and other countries. Due to recently introduced restraint measures in Europe, high levels of commercial crude oil inventories in the United States and the EIA’s expectation of lower benchmark prices in the second half of the year, Trefis believes the stock has reached its short-term potential. We highlight historical trends in income, earnings and stock prices in an interactive dashboard analysis on Buy or fear the Cimarex Energy share?
Asset write-downs reduced the company’s asset base by 35%
Cimarex Energy’s revenues fell 33%, from $ 2.3 billion in 2018 to $ 1.6 billion in 2020, as the pandemic resulted in lower demand and lower benchmark prices. While the profit margin fell into negative territory due to an impairment charge of $ 1.6 billion, the company’s balance sheet shrank 35% in 2020. Improving the company’s finances largely depends on global crude oil demand and OPEC supply constraints. With oil majors including Exxon Mobil
The benchmarks of Brent and WTI broke the $ 60 / barrel mark last month due to the extension of OPEC’s mandatory production cuts. Closing stocks of crude oil and other petroleum products in the United States have yet to reach pre-Covid levels as travel demand rebounds and vaccination rates rise. The EIA expects the benchmark WTI to average $ 50 / bbl in 2021, which will negatively impact the revenues and margins of upstream companies. While supply-side constraints have supported benchmark prices, demand-side factors, including the emergence of another coronavirus wave in Europe and a slow vaccination rate in emerging economies, could remain dissuasive.
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