2014

Cimarex Energy Reports 2013 Third Quarter Results - Record Daily Production Averages 716.8 MMcfe/d Up 13% Year-over-Year

- Wolfcamp A Long Lateral in Reeves County averages 1,816 BOE/d over 30 days

- Upsized Frac Yields Higher IP in Culberson County Wolfcamp

DENVER, Nov. 6, 2013 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2013 net income of $138.4 million, or $1.59 per diluted share.  This compares to 2012 third quarter net income of $84.3 million, or $0.97 per diluted share.  Excluding the mark-to-market of open derivative positions, third quarter 2013 earnings were $1.62 per diluted share versus $1.01 per diluted share in the third quarter of 2012(1)

Revenue from the sale of oil, natural gas and natural gas liquids (NGL) totaled $549.6 million in the third quarter of 2013 compared to $397.4 million in the same period of 2012.  Third quarter 2013 adjusted cash flow from operations was $394.0 million versus $291.2 million a year ago(2).    

Production volumes averaged a record 716.8 million cubic feet equivalent (MMcfe) per day in the third quarter, a 13 percent increase over third quarter 2012 output of 635.1 MMcfe per day.  Oil production grew 21 percent over the same period last year to a record 39,292 barrels per day.  Permian oil production reached 31,993 barrels per day.  Third quarter 2013 production volumes were 48 percent natural gas, 33 percent oil and 19 percent NGL. 

The increase in third quarter revenue and cash flow was the result of higher production volumes and improved commodity prices. For the third quarter of 2013 natural gas prices averaged $3.72 per thousand cubic feet (Mcf) up 33 percent year-over-year and oil prices for the quarter averaged $102.88 per barrel up 17 percent from the third quarter a year ago. 

Long-term debt at September 30, 2013, was $900 million comprised of $750 million of senior notes and $150 million of borrowings under the company's senior unsecured revolving credit facility.  Debt to total capitalization at quarter-end was 19 percent(3)

Cimarex Chairman and CEO, Tom Jorden, said, "The third quarter not only produced excellent financial results, it was also a period of strong technical momentum in the Texas Delaware Basin Wolfcamp shale.  We completed a Reeves County Wolfcamp A horizontal well using a 10,000-foot lateral and have also tested upsized frac stages on our traditional 5,000-foot lateral, increasing the number from 12 stages to 20.  Both were operational and economic successes.  These new completion techniques will most certainly play into our future development plans for this large, stacked-pay resource." 

Cimarex invested $388 million on exploration and development during the third quarter bringing the total invested year-to-date to $1.2 billion.  The Permian Basin accounts for 65 percent of the capital investment in 2013. 

Cimarex drilled a total of 112 gross (52 net) wells during the quarter, of which 111 were completed as producers.  At quarter-end, 50 gross (22 net) wells were awaiting completion.

Wells Drilled and Completed by Region













For the Three Months


For the Nine Months



Ended September 30,


Ended September 30,



2013

2012


2013

2012

Gross wells







Permian Basin


42

37


132

131

Mid-Continent


67

55


154

119

Gulf Coast/Other


3

1


5

3



112

93


291

253

Net wells







Permian Basin


28

24


87

88

Mid-Continent


21

23


56

49

Gulf Coast/Other


3

-


4

1



52

47


147

138

% Gross wells completed as producers


99%

99%


99%

97%

Permian Basin Update
Production from the Permian Basin averaged 352.0 MMcfe per day for the third quarter, an increase of 28 percent over third quarter 2012 and a ten percent increase sequentially.  Quarterly oil volumes increased 28 percent year-over-year to 31,993 barrels per day and accounted for 55 percent of the region's total production for the quarter.

Cimarex drilled and completed 42 gross (28 net) Permian Basin wells during the third quarter, bringing the total for 2013 to 132 gross wells (87 net).  All wells drilled in the region during the third quarter were completed as producers.  At September 30, 15 gross (10 net) wells were awaiting completion.  Drilling took place in the Delaware Basin of Texas and southeast New Mexico, mainly targeting the Bone Spring and Wolfcamp formations. 

Year-to-date, 60 gross (35 net) New Mexico Bone Spring wells have been drilled and completed.  Per well first 30-day average gross production from these wells averaged approximately 670 barrels of oil equivalent (BOE) per day (84 percent oil).  Year-to-date Ward County, Texas, Third Bone Spring drilling totaled 33 gross (24 net) wells with  per well first 30-day average gross production rates of approximately 1,000 BOE per day (80 percent oil).

In the Culberson area, Cimarex is drilling both horizontal Bone Spring and Wolfcamp wells.  Year-to-date 13 gross (nine net) Bone Spring wells have been drilled and completed with per well first 30-day average gross production of 820 BOE per day (60 percent oil).   Cimarex has also drilled 12 gross (8 net) horizontal Wolfcamp wells in Culberson County in 2013, bringing total Wolfcamp wells in the area to 41 gross (36 net).  Per well first 30-day production rates on the 41 Wolfcamp wells drilled-to-date in the Wolfcamp C and D have averaged 6.2 MMcfe per day, comprised of 42 percent gas, 28 percent oil and 30 percent NGL (assuming full NGL recovery). 

Cimarex completed two wells in Culberson County using an upsized frac design.  The Tim Tam 24 Fee #1H was completed to the Wolfcamp D using 20 frac stages with a 5,000-foot lateral and had first 30-day average gross production of 7.8 MMcfe per day, higher than the average 12-stage completion rate of 6.2 MMcfe per day.  In addition, Cimarex completed a Wolfcamp A well in Culberson County using a 20-stage completion.  That well is currently undergoing production testing.

In Reeves County, Texas, Cimarex has drilled and completed three gross (three net) horizontal Wolfcamp A wells.  The most recent well was drilled and completed using a 10,000-foot lateral and had a first 30-day average gross production rate of 1,816 BOE per day (56 percent oil, 23 percent gas and 21 percent NGL).  Cimarex currently has a second long lateral well drilling and two wells waiting on completion in Reeves County.

During the third quarter, Cimarex added 10,000 net prospective Wolfcamp acres in Ward County, Texas, bringing its total net prospective Wolfcamp acreage in the Delaware Basin to 180,000 acres.  The company currently has one rig drilling Wolfcamp wells in Ward County.

Cimarex also reported a successful well in the Avalon shale in Lea County, New Mexico.  The well had first 30-day average gross production of 1,038 BOE per day (60 percent oil) and was completed using an upsized frac (22 stages).  The Avalon shale represents further opportunity for Cimarex in the Delaware Basin.  The company has approximately 13,700 net prospective acres in Lea County.

Mid-Continent Update
Mid-Continent production averaged 337.6 MMcfe per day for the third quarter of 2013, a four percent increase over the third quarter 2012 average of 324.3 MMcfe per day.  Our Cana-Woodford area represented 216.9 MMcfe per day of the third quarter 2013 total, an 18 percent increase versus the same period last year.  Year-to-date Cimarex has drilled and completed 154 gross (56 net) wells in the Mid-Continent region, 134 gross (49 net) of which were in the Cana-Woodford shale play.  All were completed as producers.  At September 30, 35 gross (12 net) wells were awaiting completion. 

Cimarex's average daily production by commodity and region is summarized below:




For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,




2013


2012


2013


2012

Gas (Mcf per day)









Permian Basin


102,543


79,502


93,944


78,007

Mid-Continent


230,217


224,009


232,600


218,411

Gulf Coast/Other


14,062


20,735


13,799


24,110




346,822


324,246


340,343


320,528











Oil (Barrels per day)









Permian Basin


31,993


25,000


29,343


22,839

Mid-Continent


5,801


6,120


5,944


5,802

Gulf Coast/Other


1,498


1,336


1,177


1,602




39,292


32,456


36,464


30,243

NGL (Barrels per day)









Permian Basin


9,575


7,501


7,643


6,523

Mid-Continent


12,090


10,598


13,129


9,934

Gulf Coast/Other


708


1,261


778


1,487




22,373


19,360


21,550


17,944

Total Equivalent (Mcfe per day)








Permian Basin


351,951


274,508


315,860


254,179

Mid-Continent


337,563


324,317


347,038


312,827

Gulf Coast/Other


27,299


36,318


25,527


42,644




716,813


635,143


688,425


609,650

2013 Outlook
Cimarex estimates fourth quarter 2013 total company volumes to average 714-734 MMcfe per day. As a result, 2013 total company volumes are now projected to average 695-700 MMcfe/d, 11 to 12 percent growth over 2012 with oil volumes projected to grow 18 percent.  Adjusted for property sales in 2012, production is expected to grow 14 percent.

Capital investment in exploration and development is now expected to be between $1.55 and $1.6 billion, the result of slightly higher acreage acquisition and somewhat higher activity levels.

Expenses for 2013 are expected to fall within the following ranges:

$/Mcfe



Production expense

$1.11 -  $1.16


Transportation & other operating expense

  0.40 -   0.45


DD&A and ARO accretion

  2.35  -  2.45


General and administrative expense

  0.28  -  0.32


Taxes other than income (% of oil and gas revenue)

 5.8%  -  6.2%

Other
Cimarex has oil swaps and collars covering 12,000 barrels per day through December 2013 and collars covering 6,000 barrels per day from January through December 2014.  The company has Mid-Continent natural gas collars on 80,000 MMBTU per day through December 2014.  The following table summarizes the current open hedge positions:

Oil Contracts









Weighted Average Price

Period


Type


Bbls/day


Index


Floor


Ceiling


 

Swap

Oct - Dec 13


Swap


6,000


WTI



NA



NA

$

96.13

Oct - Dec 13


Collar


6,000


WTI


$

85.00


$

102.31

$

NA

Jan – Dec 14


Collar


6,000


WTI


$

85.00


$

105.68

$

NA

Gas Contracts









Weighted Ave. Price


Period


Type


MMBTU/day


Index(4)


Floor


Ceiling


Oct 13  – Dec 14


Collar


80,000


PEPL


$

3.51


$

4.57

















Cimarex accounts for commodity derivative contracts using the mark-to-market (through income) accounting method. 

Conference call and webcast
Cimarex will host a conference call and webcast today at 11:00 a.m. Mountain Time (1:00 p.m. Eastern Time). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To participate in the live, interactive call, please dial 877-270-2148 five minutes before the scheduled start time (international callers dial 1-412-902-6510).  A replay will be available for one week following the call and can be accessed by dialing 877-344-7529 (international callers dial 1-412-317-0088); conference I.D. 10034791.

About Cimarex Energy
Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production company with principal operations in the Mid-Continent and Permian Basin areas of the U.S.

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the Company is providing revised "2013 guidance", which contains projections for certain 2013 operational and financial metrics. These forward-looking statements are based on management's judgment as of the date of this press release and include certain risks and uncertainties. Please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2012, filed with the SEC, and other filings including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, for a list of certain risk factors that may affect these forward-looking statements.

Actual results may differ materially from Company projections and other forward-looking statements and can be affected by a variety of factors outside the control of the Company including, among other things: oil, NGL and natural gas price volatility; the ability to complete property sales or other transactions; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; the potential for production decline rates to be greater than expected; performance of acquired properties and newly drilled wells; costs and availability of third party facilities for gathering, processing, refining and transportation; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to hydraulic fracturing; higher than expected costs and expenses, including the availability and cost of services and materials; unexpected future capital expenditures; economic and competitive conditions; the ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested; declines in the values of our oil and gas properties resulting in impairments; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in one major geographic area; the success of the Company's risk management activities; title to properties; litigation; environmental liabilities; and other factors discussed in the Company's reports filed with the SEC. Cimarex Energy Co. encourages readers to consider the risks and uncertainties associated with projections and other forward-looking statements. In addition, the Company assumes no obligation to publicly revise or update any forward-looking statements based on future events or circumstances.

(1)

The reconciliation of earnings per diluted share adjusted for the impact of open mark-to-market derivative positions, which is a non-GAAP measure, is as follows:  For the third quarter of 2013, diluted earnings per share of $1.59 plus the per share tax-effected loss related to open derivative positions of $0.03 equals $1.62 diluted earnings per share.  For the third quarter of 2012, diluted earnings per share of $0.97 plus the per share tax-effected loss related to open derivative positions of $0.04 equals $1.01 diluted earnings per share.  Management believes that this non-GAAP measure is useful information for investors and it is a common statistic referred to by the investment community.

(2)

Adjusted cash flow from operations is a non-GAAP financial measure.  See below for a reconciliation of the related amounts.

(3)

Reconciliation of debt to total capitalization, which is a non-GAAP measure, is: long-term debt of $900 million divided by long-term debt of $900 million plus stockholders' equity of $3,816 million.  Management believes that this non-GAAP measure is useful information for investors and it is a common statistic referred to by the investment community.

(4)

PEPL refers to Panhandle Eastern Pipe Line, Tex/OK Mid-Continent Index as quoted in Platt's Inside FERC.

 

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS














For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,




2013


2012


2013


2012




(in thousands)

Net cash provided by operating activities

$

370,962

$

261,216

$

940,748

$

836,148


Change in operating assets










    and liabilities


23,027


29,957


91,971


(1,509)











Adjusted cash flow from operations

$

393,989

$

291,173

$

1,032,719

$

834,639











Management believes that the non-GAAP measure of adjusted cash flow from operations is useful information for investors because it is used internally and is accepted by the investment community as a means of measuring the company's ability to fund its capital program, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of cash flow from operating activities.  It is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.


PRICE AND PRODUCTION DATA














For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,




2013


2012


2013


2012












 Total gas production - Mcf 


31,907,621


29,830,627


92,913,719


87,824,541


 Gas volume - Mcf per day 


346,822


324,246


340,343


320,528


 Gas price - per Mcf  


$3.72


$2.79


$3.73


$2.71












 Total oil production - barrels 


3,614,865


2,985,956


9,954,625


8,286,503


 Oil volume - barrels per day 


39,292


32,456


36,464


30,243


 Oil price - per barrel 


$102.88


$88.18


$93.81


$91.67












 Total NGL production - barrels 


2,058,331


1,781,139


5,883,094


4,916,753


 NGL volume - barrels per day  


22,373


19,360


21,550


17,944


 NGL price - per barrel 


$28.63


$28.55


$28.57


$31.35





















OIL AND GAS CAPITALIZED EXPENDITURES














For the Three Months Ended


For the Nine Months Ended




September 30,


September 30,




2013


2012


2013


2012




(in thousands)


Acquisitions:










Proved *

$

(246)

$

$

677

$


Unproved


1,816


4,636


5,481


11,349




1,570


4,636


6,158


11,349












Exploration and development:










Land and Seismic


59,035


28,226


127,064


86,613


Exploration and development


328,655


389,989


1,059,546


1,120,740




387,690


418,215


1,186,610


1,207,353












Sale proceeds:










Proved *


1,212


(10,894)


(36,667)


(11,079)


Unproved




(1,041)


(1,088)




1,212


(10,894)


(37,708)


(12,167)













$

390,472

$

411,957

$

1,155,060

$

1,206,535











*

The negative amount in the third-quarter 2013 proved acquisitions and the positive amount in the third-quarter 2013 proved sales proceeds reflect net purchase price adjustments related to second-quarter 2013 activity.

 

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)
























For the Three Months Ended


For the Nine Months Ended









September 30,


September 30,









2013


2012


2013


2012









(in thousands, except per share data)
















Revenues:












Gas sales



$

118,824

$

83,208

$

346,492

$

238,102


Oil sales




371,881


263,315


933,879


759,609


NGL sales



58,922


50,860


168,106


154,160


Gas gathering, processing and other, net


11,709


9,529


32,972


31,199









561,336


406,912


1,481,449


1,183,070

Costs and expenses:










Depreciation, depletion, amortization and accretion


160,979


139,499


449,931


384,964


Production



76,166


62,699


214,985


192,818


Transportation and other operating


25,838


14,481


66,494


40,966


Gas gathering and processing


6,970


5,496


18,310


15,302


Taxes other than income


31,104


24,095


84,039


72,738


General and administrative


19,003


14,742


57,416


41,523


Stock compensation


3,347


8,301


10,459


17,519


(Gain) loss on derivative instruments, net


10,824


5,329


(1,233)


(661)


Other operating, net


2,507


2,236


7,804


7,295









336,738


276,878


908,205


772,464
















Operating income


224,598


130,034


573,244


410,606
















Other (income) and expense:










Interest expense 


12,945


12,191


38,228


32,852


Amortization of deferred financing costs


1,009


1,032


3,044


2,718


Capitalized interest


(7,286)


(9,231)


(23,868)


(26,154)


Loss on early extinguishment of debt





16,214


Other, net




(2,263)


(6,159)


(13,637)


(18,714)
















Income before income tax


220,193


132,201


569,477


403,690

Income tax expense


81,823


47,939


211,615


149,019
















Net income



$

138,370

$

84,262

$

357,862

$

254,671
















Earnings per share to common stockholders:

























Basic 




$

1.59

$

0.97

$

4.12

$

2.94


Diluted




$

1.59

$

0.97

$

4.12

$

2.93
















Dividends per share

$

0.14

$

0.12

$

0.42

$

0.36
















Shares attributable to common stockholders:










Unrestricted common shares outstanding


85,213


84,681


85,213


84,681


Diluted common shares


85,347


84,997


85,330


85,021
















Shares attributable to common stockholders and participating securities:










Basic shares outstanding


86,847


86,589


86,847


86,589


Fully diluted shares 


86,981


86,905


86,964


86,929
















Comprehensive income:










Net income


$

138,370

$

84,262

$

357,862

$

254,671


Other comprehensive income:











Change in fair value of investments, net of tax 


302


238


401


502


Total comprehensive income

$

138,672

$

84,500

$

358,263

$

255,173

 


CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)


























For the Three Months Ended


For the Nine Months Ended










September 30,


September 30,










2013


2012


2013


2012










(in thousands)

















Cash flows from operating activities:










Net income



$

138,370

$

84,262

$

357,862

$

254,671


Adjustment to reconcile net income to net cash 











provided by operating activities:












Depreciation, depletion, amortization and accretion


160,979


139,499


449,931


384,964




Deferred income taxes


81,823


49,568


211,615


150,648




Stock compensation


3,347


8,301


10,459


17,519




(Gain) loss on derivative instruments


10,824


5,329


(1,233)


(661)




Settlements on derivative instruments


(6,097)



(4,332)





Loss on early extinguishment of debt





16,214




Changes in non-current assets and liabilities


3,312


2,815


9,102


7,930




Amortization of deferred financing costs













and other, net


1,431


1,399


(685)


3,354


Changes in operating assets and liabilities:












Receivables, net


(33,071)


(83,436)


(88,131)


24,398




Other current assets


(5,041)


13,673


9,799


8,763




Accounts payable and accrued liabilities


15,085


39,806


(13,639)


(31,652)





Net cash provided by operating activities


370,962


261,216


940,748


836,148

Cash flows from investing activities:










Oil and gas expenditures


(389,417)


(423,134)


(1,165,555)


(1,181,742)


Sales of oil and gas assets


23,300


10,894


37,707


12,167


Sales of other assets


95


142


31,252


550


Other expenditures


(9,182)


(16,826)


(34,657)


(42,913)





Net cash used by investing activities


(375,204)


(428,924)


(1,131,253)


(1,211,938)

Cash flows from financing activities:










Net bank debt borrowings


8,000


80,000


150,000


25,000


Proceeds from other long-term debt





750,000


Other long-term debt payments





(363,595)


Financing costs incurred


(100)


(1,129)


 

(100)


(13,821)


Dividends paid




(12,122)


(10,330)


(34,570)


(29,199)


Issuance of common stock and other


8,463


7,646


10,168


10,410





Net cash provided by financing activities


4,241


76,187


125,498


378,795

Net change in cash and cash equivalents


(1)


(91,521)


(65,007)


3,005

Cash and cash equivalents at beginning of period


4,532


96,932


69,538


2,406

Cash and cash equivalents at end of period

$

4,531

$

5,411

$

4,531

$

5,411

 

 

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)










September 30,


December 31,



2013


2012

Assets


(in thousands, except share data)

Current assets:







Cash and cash equivalents

$

4,531

$

69,538


Restricted cash


818



Receivables, net


391,105


302,974


Oil and gas well equipment and supplies


69,517


81,029


Deferred income taxes


13,902


8,477


Derivative instruments


7,168



Other current assets


9,832


8,119



Total current assets


496,873


470,137

Oil and gas properties at cost, using the full cost method of accounting:






Proved properties


12,466,073


11,258,748


Unproved properties and properties under development,







not being amortized


597,526


645,078









13,063,599


11,903,826


Less – accumulated depreciation, depletion and amortization


(7,318,137)


(6,899,057)


Net oil and gas properties


5,745,462


5,004,769

Fixed assets, net


137,455


152,605

Goodwill





620,232


620,232

Derivative instruments


2,717


Other assets, net


51,625


57,409








$

7,054,364

$

6,305,152

Liabilities and Stockholders' Equity





Current liabilities:






Accounts payable

$

111,082

$

103,653


Accrued liabilities


403,413


392,909


Derivative instruments


4,320



Revenue payable


187,065


149,300



Total current liabilities


705,880


645,862

Long-term debt



900,000


750,000

Deferred income taxes


1,338,623


1,121,353

Other liabilities 



293,576


313,201



Total liabilities


3,238,079


2,830,416

Stockholders' equity:






Preferred stock, $0.01 par value, 15,000,000 shares







authorized, no shares issued




Common stock, $0.01 par value, 200,000,000 shares authorized,







86,838,423 and 86,595,976 shares issued, respectively


868


866


Paid-in capital


1,959,160


1,939,628


Retained earnings


1,855,382


1,533,768


Accumulated other comprehensive income


875


474









3,816,285


3,474,736








$

7,054,364

$

6,305,152

SOURCE Cimarex Energy Co.



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