Cimarex Reports First Quarter 2017 Results

Production expense

$0.60 -  0.70

Transportation, processing and other expense

  0.50  -  0.60

DD&A and ARO accretion*

  1.05  -  1.15

General and administrative expense

  0.20  -  0.25

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

   5.0  -  6.0%

*Adjusted for the impact of the previously announced corrections to the ceiling test impairment.

WELLS BROUGHT ON PRODUCTION BY REGION

For the Three Months Ended

March 31,

2017

2016

Gross wells

Permian Basin

25

7

Mid-Continent

45

15

70

22

Net wells

Permian Basin

16

3

Mid-Continent

10

2

26

5

DAILY PRODUCTION BY REGION

For the Three Months Ended

March 31,

2017

2016

Permian Basin

Gas (MMcf)

200.9

173.6

Oil (Bbls)

41,039

36,549

NGL (Bbls)

21,624

14,059

Total Equivalent (MMcfe)

576.8

477.3

Mid-Continent

Gas (MMcf)

285.0

298.4

Oil (Bbls)

11,053

9,253

NGL (Bbls)

22,151

23,148

Total Equivalent (MMcfe)

484.2

492.8

Total Company

Gas (MMcf)

487.2

472.9

Oil (Bbls)

52,181

46,110

NGL (Bbls)

43,804

37,263

Total Equivalent (MMcfe)

1,063.1

973.1

AVERAGE REALIZED PRICE BY REGION

For the Three Months Ended

March 31,

2017

2016

Permian Basin

Gas ($ per Mcf)

2.89

1.96

Oil ($ per Bbl)

47.95

28.22

NGL ($ per Bbl)

18.22

7.93

Mid-Continent

Gas ($ per Mcf)

3.09

1.91

Oil ($ per Bbl)

46.81

27.07

NGL ($ per Bbl)

22.53

10.99

Total Company

Gas ($ per Mcf)

3.01

1.92

Oil ($ per Bbl)

47.71

28.02

NGL ($ per Bbl)

20.40

9.84

2Q17

3Q17

4Q17

1Q18

2Q18

Average

Gas:

PEPL(3)

Volume (MMBtu/d)

140,000

120,000

90,000

60,000

30,000

88,100

Wtd Avg Floor

$      2.53

$      2.60

$   2.72

$   2.73

$   2.57

$     2.62

Wtd Avg Ceiling

$      3.06

$      3.12

$   3.20

$   3.23

$   3.14

$     3.13

El Paso Perm(3)

Volume (MMBtu/d)

103,000

80,000

60,000

40,000

20,000

60,800

Wtd Avg Floor

$      2.58

$      2.63

$   2.74

$   2.75

$   2.50

$     2.64

Wtd Avg Ceiling

$      3.09

$      3.13

$   3.20

$   3.22

$   3.04

$     3.13

Oil:

WTI(4)

Volume (Bbl/d)

24,000

20,000

15,000

10,000

4,000

14,600

Wtd Avg Floor

$   44.23

$   46.08

$ 47.27

$ 48.40

$ 50.00

$   46.25

Wtd Avg Ceiling

$   53.91

$   56.19

$ 57.51

$ 59.05

$ 58.96

$   56.26

____________________________

(1)

Adjusted net income and adjusted cash flow from operations are non-GAAP financial measures.  See below for reconciliations of the related GAAP amounts.

(2)

Debt to total capitalization is calculated by dividing long-term debt ($1.5 billion) by long-term debt ($1.5 billion) plus stockholders' equity ($2.2 billion). 

(3)

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index and El Paso Perm is El Paso Permian Basin index both as quoted in Platt's Inside FERC.

(4)

WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

RECONCILIATION OF ADJUSTED NET INCOME (LOSS) AND ADJUSTED EARNINGS (LOSS) PER SHARE

The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net income (loss) and earnings (loss) per share to adjusted net income (loss) and adjusted earnings (loss) per share (non-GAAP) for the periods indicated.

For the Three Months Ended

March 31,

2017

2016

(in thousands, except per share data)

Net income (loss)

$

130,972

$

(231,459)

Impairment of oil and gas properties

-

318,786

Mark-to-market (gain) loss on open derivative positions

(49,921)

4,640

Tax impact

18,671

(117,913)

Adjusted net income (loss)

$

99,722

$

(25,946)

Diluted earnings (loss) per share*

$

1.38

$

(2.49)

Adjusted diluted earnings (loss) per share*

$

1.05

$

(0.28)

Diluted shares attributable to common stockholders and participating securities

95,166

93,000

Adjusted net income (loss) and adjusted diluted earnings (loss) per share excludes the noted items because management believes these items affect the comparability of operating results. The company discloses these non-GAAP financial measures as a useful adjunct to GAAP earnings because:

a) Management uses adjusted net income (loss) to evaluate the company's operating performance between periods and to compare the company's performance to other oil and gas exploration and production companies.

b) Adjusted net income (loss) is more comparable to earnings estimates provided by research analysts.

Earnings (loss) per share are based on actual figures rather than the rounded figures presented.

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net cash provided by operating activities to adjusted cash flows from operations (non-GAAP) for the periods indicated.

For the Three Months Ended

March 31,

2017

2016

(in thousands)

Net cash provided by operating activities

$

249,514

$

85,405

Change in operating assets and liabilities

16,320

(3,814)

Adjusted cash flow from operations

$

265,834

$

81,591

Management uses the non-GAAP financial measure of adjusted cash flow from operations as a means of measuring our ability to fund our capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of net cash provided by operating activities.  Management believes this non-GAAP financial measure provides useful information to investors for the same reason, and that it is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

OIL AND GAS CAPITALIZED EXPENDITURES

For the Three Months Ended

March 31,

2017

2016

(in thousands)

Acquisitions:

Proved

$

—

$

3,324

Unproved

3,033

10,568

Net purchase price adjustments

5

(2,962)

3,038

10,930

Exploration and development:

Land and seismic

77,185

11,162

Exploration and development

228,467

147,022

305,652

158,184

Sale proceeds:

Proved

—

(12,500)

Unproved

(4,966)

—

Net purchase price adjustments

65

(471)

(4,901)

(12,971)

$

303,789

$

156,143

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited)

For the Three Months Ended

March 31,

2017

2016

(in thousands, except per share data)

Revenues:

Oil sales

$

224,066

$

117,573

Gas sales

131,945

82,608

NGL sales

80,426

33,352

Gas gathering and other, net

10,739

7,067

447,176

240,600

Costs and expenses:

Impairment of oil and gas properties

—

318,786

Depreciation, depletion, amortization, and accretion

97,436

112,934

Production

62,421

70,702

Transportation, processing, and other operating

55,023

46,443

Gas gathering and other

8,427

8,080

Taxes other than income

21,313

13,839

General and administrative

18,034

13,897

Stock compensation

6,288

5,528

Gain on derivative instruments, net

(43,861)

(428)

Other operating expense, net

616

90

225,697

589,871

Operating income (loss)

221,479

(349,271)

Other (income) and expense:

Interest expense 

21,052

20,805

Capitalized interest

(6,641)

(4,904)

Other, net

(2,210)

(1,650)

Income (loss) before income tax

209,278

(363,522)

Income tax expense (benefit)

78,306

(132,063)

Net income (loss)

$

130,972

$

(231,459)

Earnings (loss) per share to common stockholders:

Basic 

$

1.38

$

(2.49)

Diluted

$

1.38

$

(2.49)

Dividends declared per share

$

0.08

$

0.08

Shares attributable to common stockholders:

Unrestricted common shares outstanding

93,389

93,000

Diluted common shares

93,428

93,000

Shares attributable to common stockholders and participating securities:

Basic shares outstanding

95,128

N/A*

Fully diluted shares 

95,166

N/A*

Comprehensive income (loss):

Net income (loss)

$

130,972

$

(231,459)

Other comprehensive income:

Change in fair value of investments, net of tax 

402

85

Total comprehensive income (loss)

$

131,374

$

(231,374)

*

Due to the net loss in the period ended March 31, 2016, shares of 94,824, which include participating securities, are not considered in the loss per share calculations.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended

March 31,

2017

2016

(in thousands)

Cash flows from operating activities:

Net income (loss)

$

130,972

$

(231,459)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Impairment of oil and gas properties

—

318,786

Depreciation, depletion, amortization, and accretion

97,436

112,934

Deferred income taxes

78,312

(132,063)

Stock compensation

6,288

5,528

Gain on derivative instruments, net

(43,861)

(428)

Settlements on derivative instruments

(6,060)

5,068

Changes in non-current assets and liabilities

1,019

1,863

Other, net

1,728

1,362

Changes in operating assets and liabilities:

Receivables

(44,662)

33,147

Other current assets

(2,965)

11,982

Accounts payable and other current liabilities

31,307

(41,315)

Net cash provided by operating activities

249,514

85,405

Cash flows from investing activities:

Oil and gas expenditures

(311,841)

(176,395)

Sales of oil and gas assets

4,901

12,971

Sales of other assets

45

88

Other capital expenditures

(8,082)

(9,477)

Net cash used by investing activities

(314,977)

(172,813)

Cash flows from financing activities:

Dividends paid

(7,577)

(15,104)

Employee withholding taxes paid upon the net settlement of equity-classified stock awards

(938)

(345)

Proceeds from exercise of stock options and other

10

114

Net cash used by financing activities

(8,505)

(15,335)

Net change in cash and cash equivalents

(73,968)

(102,743)

Cash and cash equivalents at beginning of period

652,876

779,382

Cash and cash equivalents at end of period

$

578,908

$

676,639

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)

March 31,

December 31,

2017

2016

Assets

(in thousands, except share data)

Current assets:

Cash and cash equivalents

$

578,908

$

652,876

Receivables, net of allowance

319,142

274,597

Oil and gas well equipment and supplies

37,487

33,342

Derivative instruments

6,381

—

Other current assets

7,309

8,489

Total current assets

949,227

969,304

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

Proved properties

16,519,581

16,225,495

Unproved properties and properties under development, not being amortized

489,888

478,277

17,009,469

16,703,772

Less – accumulated depreciation, depletion, amortization, and impairment

(14,434,516)

(14,349,505)

Net oil and gas properties

2,574,953

2,354,267

Fixed assets, net of accumulated depreciation

203,917

205,465

Goodwill

620,232

620,232

Derivative instruments

2,438

—

Deferred income taxes

10,424

55,835

Other assets

32,808

32,621

$

4,393,999

$

4,237,724

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable

$

86,182

$

74,486

Accrued liabilities

268,926

278,781

Derivative instruments

10,838

49,370

Revenue payable

141,376

119,715

Total current liabilities

507,322

522,352

Long-term debt:

Principal

1,500,000

1,500,000

Less – unamortized debt issuance costs

(11,500)

(12,061)

Long-term debt, net

1,488,500

1,487,939

Other liabilities 

187,228

184,444

Total liabilities

2,183,050

2,194,735

Commitments and contingencies

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, 95,116,764 and 95,123,525 shares issued, respectively

951

951

Additional paid-in capital

2,771,296

2,763,452

Retained earnings (accumulated deficit)

(562,645)

(722,359)

Accumulated other comprehensive income

1,347

945

Total stockholders' equity

2,210,949

2,042,989

$

4,393,999

$

4,237,724