Cimarex Reports Fourth Quarter and Full Year 2019 Results

DENVER, Feb. 19, 2020 /PRNewswire/ --

• Fourth quarter oil production averaged 92.0 MBbls per day
• Full year oil production averaged 86.2 MBbls per day
• 2019 capital investment (including midstream) totaled $1.32 billion; below guidance range
• Lower D&C costs drove the beat
• Generated $1.34 billion of net cash from operating activities
• $141 million of free cash flow¹ in 2019; $59 million after dividend

Cimarex Energy Co. XEC today reported a net loss for fourth quarter 2019 of $384.1 million, or $3.87 per share, compared to net income of $316.2 million, or $3.32 per share, in the same period a year ago. For the full year, Cimarex reported a net loss of $124.6 million, or $1.33 per share, compared to 2018 net income of $791.9 million, or $8.32 per share.  Both fourth quarter and full year results were negatively impacted by a non-cash charge related to the impairment of oil and gas properties.  Fourth quarter 2019 adjusted net income (non-GAAP) was $120.4 million, or $1.18 per share, compared to adjusted net income (non-GAAP) of $192.1 million, or $2.01 per share in the same period a year ago¹.  Full year 2019 adjusted net income (non-GAAP) was $448.8 million, or $4.46 per share, compared to $708.7 million, or $7.42 per share  in 2018¹.  Adjusted cash flow from operations (non-GAAP) was $416.0 million in fourth quarter 2019 compared to $428.2 million in the same period a year ago¹.  Full year 2019 adjusted cash flow from operations (non-GAAP) was $1.46 billion compared to $1.53 billion in 2018¹.

Oil volumes in the fourth quarter were sequentially higher, averaging 92.0 thousand barrels (MBbls) per day.  For the full year, Cimarex reported average daily oil volumes of 86.2 MBbls, a 27 percent year-over-year increase.  Cimarex produced 292.7 thousand barrels of oil equivalent (MBOE) per day in the fourth quarter and averaged 278.5 MBOE per day for the year.

In the fourth quarter realized oil prices averaged $54.80 per barrel, up 11 percent from the $49.30 per barrel received in the fourth quarter of 2018.  Realized natural gas prices averaged $1.19 per thousand cubic feet (Mcf), down 45 percent from the fourth quarter 2018 average of $2.16 per Mcf.  NGL prices averaged $14.13 per barrel, down 32 percent from the $20.71 per barrel received in the fourth quarter of 2018, but up 31 percent from the lows we saw in the third quarter of 2019.  For the full year, Cimarex realized $52.77 per barrel of oil, down 7 percent from 2018, $1.11 per Mcf of natural gas and $13.55 per barrel of NGLs sold.

Both oil and natural gas prices were negatively impacted by local price differentials in 2019 although oil price differential did see some improvement year-over-year.  Our realized Permian oil differential to WTI Cushing averaged $(4.48) per barrel in 2019 compared to $(9.82) in 2018.  For the year, Cimarex's average differential on its Permian natural gas production was $(2.14) per Mcf compared to the Henry Hub index and, in the Mid-Continent region, realized gas prices differentials were $(0.68) per Mcf compared to Henry Hub.

Cimarex invested a total of $1.32 billion in 2019, which included $944 million attributable to drilling and completion (D&C) activities, $75 million to saltwater disposal and $74 million to midstream and other investments. Capital investments were funded with cash flow from operations.

Proved reserves at December 31, 2019 totaled 620 million barrels of oil equivalent (MMBOE), up five percent year over year.  Oil reserves increased 16 percent.  Cimarex added 119 MMBOE through extensions and discoveries and 3.5 MMBOE through net performance revisions resulting in reserve replacement of 121 percent of 2019 production. Proved reserves are 86 percent proved developed.

Total debt at December 31, 2019 consisted of $2.0 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $94.7 million at year-end.  Debt was 37 percent of total capitalization².

Operations Update

Cimarex invested $1.32 billion in 2019 including $944 million (72 percent) of D&C capital.  Also included is $74 million of investment in midstream and other and $75 million in saltwater disposal investment.  Of the $1.32 billion, 85 percent was invested in the Permian region and 15 percent in the Mid-Continent.

During 2019, Cimarex participated in the drilling and completion of 291 gross (92 net) wells.  At year-end, 95 gross (32 net) wells were waiting on completion, of which 45 gross (1 net) were in the Mid-Continent and 50 gross (31 net) were in the Permian.  Cimarex currently operates ten drilling rigs.

Permian Region
Production from the Permian region averaged 207.1 MBOE per day in the fourth quarter, or 71 percent of total company volumes.  Oil volumes averaged 78.4 MBbls per day, 85 percent of total company oil volumes.  For the full year, production averaged 190.7 MBOE per day, 68 percent of total company volumes with Permian oil representing 84 percent of Cimarex's oil volumes in 2019.

Cimarex brought 31 gross (22 net) wells on production in the Permian during fourth quarter, bringing the total wells on production in 2019 to 131 gross (76 net).  About 86 percent of our operated wells were drilled from multi-well pads and our average lateral length on our operated wells brought on production in the Permian was 9,529 feet in 2019. Cimarex currently operates ten rigs and two completion crews in the region.

Mid-Continent Region
Production from the Mid-Continent averaged 85.3 MBOE per day for the fourth quarter, down 18 percent from fourth quarter 2018 and down three percent sequentially.  Oil volumes averaged 13.5 MBbls per day and represented 15 percent of the company's total oil volume in the quarter.  For the full year, production averaged 87.3 MBOE per day, down eight percent year over year. Oil volumes averaged 13.8 MBbls per day in 2019, down nine percent year over year.

Wells brought on production during the fourth quarter totaled 16 gross (1 net) in the Mid-Continent region, bringing the total wells in 2019 to 160 gross (16 net).  At the end of the quarter, 45 gross (1 net) wells were waiting on completion.

Activity in the region continues to focus on the Woodford and Meramec shale plays in western Oklahoma.

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

Other
The following table summarizes Cimarex's current hedge positions:

Conference call and webcast
Cimarex will host a conference call tomorrow, February 20, at 11:00 a.m. EST (9:00 a.m. MST) to discuss its fourth quarter and 2019 financial and operating results as well as management's outlook for 2020.  The call will be webcast and accessible on the Cimarex website at www.cimarex.com.  To join the live, interactive call, please dial 866-367-3053 ten minutes before the scheduled start time (callers in Canada dial 855-669-9657 and international callers dial 412-902-4216).

A replay will be available on the company's website.

Investor Presentation
For more details on Cimarex's 2019 results, please refer to the company's investor presentation available at www.cimarex.com.

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

Forward-Looking Statements
This press release contains forward-looking statements, including statements regarding projected results and future events. 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, 2018, filed with the SEC, and other filings including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, for a description 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 levels and volatility; higher than expected costs and expenses, including the availability and cost of services and materials; our ability to successfully integrate the March 2019 acquisition of Resolute Energy Corporation; compliance with environmental and other regulations; costs and availability of third party facilities for gathering, processing, refining and transportation; risks associated with operating in one major geographic area; environmental liabilities; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; declines in the values of our oil and gas properties resulting in impairments; the potential for production decline rates to be greater than expected; performance of acquired properties and newly drilled wells; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions and disposal of produced water; unexpected future capital expenditures; economic and competitive conditions; the availability and cost of capital; 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; changes in estimates of proved reserves; derivative and hedging activities; the success of the company's risk management activities; title to properties; litigation; the ability to complete property sales or other transactions; the effectiveness of controls over financial reporting; 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.

RECONCILIATION OF ADJUSTED NET INCOME

The following reconciles net (loss) income as reported under generally accepted accounting principles (GAAP) to adjusted net income (non-GAAP) for the periods indicated.

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS, FREE CASH FLOW AND
FREE CASH FLOW AFTER DIVIDEND

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) , free cash flow (non-GAAP) and free cash flow after dividend (non-GAAP) for the periods indicated.

Management uses the non-GAAP financial measures of adjusted cash flow from operations, free cash flow and free cash flow aver dividend as 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 these non-GAAP financial measures provide useful information to investors for the same reason, and that they are also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

PROVED RESERVES

* Pre-tax PV-10 is a non-GAAP financial measure. Pre-tax PV-10 is comparable to the standardized measure, which is the most directly comparable GAAP financial measure. Pre-tax PV-10 is computed on the same basis as the standardized measure but without deducting future income taxes. As of December 31, 2019 and 2018, Cimarex's discounted future income taxes were $319.4 million and $724.0 million, respectively. Cimarex's standardized measure of discounted future net cash flows was $3,629.0 million at year-end 2019 and $4,015.2 million at year-end 2018. Management uses pre-tax PV-10 as one measure of the value of the company's proved reserves and to compare relative values of proved reserves to other exploration and production companies without regard to income taxes. Management believes pre-tax PV-10 is a useful measure for comparison of proved reserve values among companies because, unlike standardized measure, it excludes future income taxes that often depend on the unique income tax characteristics of the owner of the reserves rather than on the nature, location and quality of the reserves themselves. Management further believes that professional research analysts and rating agencies use pre-tax PV-10 in similar ways. However, pre-tax PV-10 is not a substitute for the standardized measure of discounted future net cash flows. Cimarex's pre-tax PV-10 and the standardized measure of discounted future net cash flows do not purport to present the fair value of its oil and natural gas reserves.

PROVED RESERVES BY REGION