Natural gas prices have endured yet another free-fall during recent months, abruptly amputating about one-third of the $6 handle that the fuel fetched as we entered 2010. But while many natural gas companies suffer in tandem, one energy contender might be bucking the trend.
Shares of natural gas producers have mostly dipped year-to-date, albeit to different degrees. Oil-heavy Anadarko Petroleum
Enter Cimarex Energy
By all measures, Cimarex is on a roll. At a time when gas-heavy producers like Chesapeake are feeling the pain from weak gas prices, Cimarex turned in a product mix skewing more heavily toward far more profitable oil and natural gas liquids (NGLs). Some of that success relates to a strong liquids component in the granite wash plays, where fellow operator Newfield Exploration
Closing out 2009 with a bang, Cimarex replaced 185% of 2009 production with the addition of 312Bcfe in proven reserves. Importantly, a full 77% of those added reserves came from proved developed producing reserves (PDPs) ... which provide a significantly more reliable gauge of productive potential than proved undeveloped reserves (PUDs). This will help to sustain Cimarex's impressively reliable reserve base, compared to other operators with more to prove. Finally, Cimarex continues to clean up its balance sheet, with a welcome $60 million surge in cash reserves underscoring a reduced 14% debt-to-total capitalization ratio.
With all of these improving metrics in play, it's no wonder that Cimarex has lurched ahead of the pack. Even prior to Monday's 7% intraday surge, Cimarex shares had already tacked on some 15% year to date.
Although I can scarcely imagine natural gas prices remaining so deeply disjointed from crude oil and coal prices, I am compelled to urge at least a cubic foot of caution before investors dip into higher-flying, trend-bucking stocks. Still, if you prefer to stick with the strongest performers, regardless of relative strength among the shares, Cimarex could be just the well of opportunity you're looking for.