Cimarex Reports Third-Quarter 2010 Net Income of $128.2 Million

Expenses ($/Mcfe):

Production expense

$0.90 -  $1.10

Transportation expense

0.19  -  0.24

DD&A and ARO accretion

1.35  -  1.55

General and administrative expense

0.22  -  0.28

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

7.5%  -  8.5%

Natural Gas Contracts

Weighted Average Price

Period

Type

Volume (2)

Index(3)

Floor

Ceiling

Swap

Oct 10 - Dec 10

Collar

100,000

PEPL

$

5.00

$

6.62

$

-

Oct 10 - Dec 10

Swap

40,000

PEPL

$

-

$

-

$

5.18

Oct 10 - Dec 10

Collar

20,000

HSC

$

5.00

$

6.85

$

-

160,000

Jan 11 – Dec 11

Swap

20,000

PEPL

$

-

$

-

$

5.05

Oil Contracts

Weighted Average Price

Period

Type

Volume (2)

Index(3)

Floor

Ceiling

Put

Oct 10 – Dec 10

Collar

10,000

WTI

$

60.03

$

92.07

$

-

Oct 10 – Dec 10

Put/Floor

1,000

WTI

$

-

$

-

$

60.00

11,000

Jan 11 – Dec 11

Collar

12,000

WTI

$

65.00

$

105.44

$

-

RECONCILIATION OF CASH FLOW FROM OPERATIONS

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

(in thousands)

Net cash provided by operating activities

$

314,408

$

271,300

$

886,668

$

465,646

Change in operating assets

   and liabilities

(17,628)

(89,620)

(16,787)

6,788

Cash flow from operations

$

296,780

$

181,680

$

869,881

$

472,434

Management believes that the non-GAAP measure of 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.  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,

2010

2009

2010

2009

Total gas production - Mcf

32,427,382

28,229,461

101,395,114

87,604,619

Gas volume - Mcf per day

352,472

306,842

371,411

320,896

Gas price - per Mcf  

$4.48

$3.80

$5.15

$3.70

Total oil production - barrels

2,429,407

2,008,011

7,347,108

6,226,045

Oil volume - barrels per day

26,407

21,826

26,912

22,806

Oil price - per barrel

$73.20

$64.22

$74.87

$51.26

Total NGL production - barrels

1,365,581

56,389

2,735,823

162,291

NGL volume - barrels per day  

14,843

613

10,021

594

NGL price - per barrel

$31.73

$37.53

$33.41

$33.05

*  Increases in our 2010 production volumes primarily reflect positive drilling results in our western Oklahoma Cana-Woodford shale play, our Permian Basin oil programs and our Yegua/Cook Mountain play in southeast Texas. A portion of the changes also result from contractual terms whereby NGL volumes are recorded based on where title transfer occurs. As a consequence, reported gas and NGL volumes and prices between periods may not be comparable.  

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

(in thousands)

Acquisitions:

Proved

$

19

$

350

$

13,805

$

474

Unproved

978

(10,315)

21,497

(10,315)

997

(9,965)

35,302

(9,841)

Exploration and development:

Land and Seismic

49,368

7,036

112,076

34,072

Exploration and development

246,501

119,144

613,387

332,844

295,869

126,180

725,463

366,916

Sale proceeds:

Proved*

807

(9,877)

(24,054)

(25,271)

Unproved

—

—

(3,917)

(3,034)

807

(9,877)

(27,971)

(28,305)

$

297,673

$

106,338

$

732,794

$

328,770

*  The positive amount in the third-quarter 2010 proved sales proceeds reflects purchase price adjustments related to a disposition in the second quarter of 2010.  

CONDENSED STATEMENTS OF OPERATIONS (unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

(In thousands, except per share data)

Revenues:

Gas sales

$

145,396

$

107,275

$

522,408

$

324,438

Oil sales

177,834

128,957

550,058

319,144

NGL sales

43,331

2,116

91,391

5,363

Gas gathering, processing and other, net

12,022

10,786

41,797

32,053

378,583

249,134

1,205,654

680,998

Costs and expenses:

Impairment of oil and gas properties

—

—

—

791,137

Depreciation, depletion, amortization and accretion

79,906

63,264

227,047

214,456

Production

52,010

42,682

139,349

139,127

Transportation

13,084

8,760

35,076

25,233

Gas gathering and processing

4,577

4,830

17,182

14,347

Taxes other than income

28,094

19,728

88,862

50,525

General and administrative

11,274

12,522

36,136

29,803

Stock compensation, net

3,241

2,477

9,012

6,831

(Gain) loss on derivative instruments, net

(15,028)

17,357

(70,914)

17,613

Other operating, net

2,291

2,911

2,321

19,094

179,449

174,531

484,071

1,308,166

Operating income (loss)

199,134

74,603

721,583

(627,168)

Other (income) and expense:

Interest expense

7,349

8,902

22,481

26,677

Amortization of deferred financing costs

1,710

1,721

5,141

3,467

Capitalized interest

(7,259)

(5,295)

(21,968)

(16,230)

Gain on early extinguishment of debt

(3,776)

—

(3,776)

—

Other, net

(2,711)

3,737

(2,790)

11,627

Income (loss) before income tax

203,821

65,538

722,495

(652,709)

Income tax expense (benefit)

75,605

26,833

265,298

(236,121)

Net income (loss)

$

128,216

$

38,705

$

457,197

$

(416,588)

Earnings (loss) per share to common stockholders:

Basic

$

1.50

$

0.46

$

5.36

$

(5.10)

Diluted

$

1.50

$

0.46

$

5.33

$

(5.10)

Dividends per share

$

0.08

$

0.06

$

0.24

$

0.18

Shares attributable to common stockholders:

Unrestricted Common shares outstanding

82,806

81,792

82,806

81,792

Diluted common shares

83,217

82,177

83,265

81,792

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

85,348

84,162

85,348

84,162

Fully diluted shares

85,759

84,547

85,807

84,162

CONDENSED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

For the Nine Months Ended

September 30,

September 30,

2010

2009

2010

2009

(In thousands)

Cash flows from operating activities:

Net income (loss)

$

128,216

$

38,705

$

457,197

$

(416,588)

Adjustment to reconcile net income (loss) to net cash

provided by operating activities:

Impairments and other valuation losses

—

2,910

—

804,815

Depreciation, depletion, amortization and accretion

79,906

63,264

227,047

214,456

Deferred income taxes

88,375

13,528

213,678

(220,592)

Stock compensation, net

3,241

2,477

9,012

6,831

Derivative instruments, net

(881)

17,532

(39,656)

21,157

Changes in non-current assets and liabilities

4,893

42,794

10,507

48,673

Amortization of deferred financing costs

and other, net

(6,970)

470

(7,904)

13,682

Changes in operating assets and liabilities:

(Increase) decrease in receivables, net

(14,413)

7,738

(4,364)

84,044

(Increase) decrease in other current assets

(16,556)

43,404

31

17,404

Increase (decrease) in accounts payable and

other current liabilities

48,597

38,478

21,120

(108,236)

Net cash provided by operating activities

314,408

271,300

886,668

465,646

Cash flows from investing activities:

Oil and gas expenditures

(264,595)

(97,366)

(691,536)

(390,108)

Sales of oil and gas and other assets

4,741

19,993

33,646

38,556

Sales of short-term investments

—

2,098

—

3,328

Other expenditures

(24,133)

(10,404)

(38,941)

(21,131)

Net cash used in investing activities

(283,987)

(85,679)

(696,831)

(369,355)

Cash flows from financing activities:

Net decrease in bank debt

—

(183,000)

(25,000)

(64,000)

Decrease in other long-term debt

(19,450)

—

(19,450)

—

Financing costs incurred

(1)

(34)

(101)

(17,995)

Dividends paid

(6,827)

(5,047)

(18,662)

(15,123)

Issuance of common stock and other

1,896

2,462

18,928

2,576

Net cash used in

financing activities

(24,382)

(185,619)

(44,285)

(94,542)

Net change in cash and cash equivalents

6,039

2

145,552

1,749

Cash and cash equivalents at beginning of period

142,057

2,960

2,544

1,213

Cash and cash equivalents at end of period

$

148,096

$

2,962

$

148,096

$

2,962

BALANCE SHEETS (unaudited)

September 30,

December 31,

Assets

2010

2009

(In thousands, except share data)

Current assets:

Cash and cash equivalents

$

148,096

$

2,544

Restricted cash

659

593

Receivables, net

232,235

227,896

Oil and gas well equipment and supplies

99,998

145,153

Deferred income taxes

—

15,837

Derivative instruments

25,735

1,238

Other current assets

60,459

13,997

Total current assets

567,182

407,258

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

Proved properties

8,163,420

7,549,861

Unproved properties and properties under development,

not being amortized

519,489

399,724

8,682,909

7,949,585

Less – accumulated depreciation, depletion and amortization

(5,969,974)

(5,764,669)

Net oil and gas properties

2,712,935

2,184,916

Fixed assets, net

149,673

127,237

Goodwill

691,432

691,432

Other assets, net

28,472

33,694

$

4,149,694

$

3,444,537

Liabilities and Stockholders’ Equity

Current liabilities:

Accounts payable

52,626

30,214

Accrued liabilities

323,496

235,815

Derivative instruments

438

13,902

Revenue payable

117,061

108,832

Total current liabilities

493,621

388,763

Long-term debt

350,000

392,793

Deferred income taxes

531,587

348,897

Other liabilities

272,227

275,978

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,

84,700,678 and 83,541,995 shares issued, respectively

847

835

Paid-in capital

1,886,414

1,859,255

Retained earnings

614,901

178,035

Accumulated other comprehensive income (loss)

97

(19)

2,502,259

2,038,106

$

4,149,694

$

3,444,537