Cimarex Reports Fourth Quarter and Full Year 2020 Results

DENVER, Feb. 22, 2021 /PRNewswire/ --  

• Fourth quarter oil production averaged 67.8 MBbls per day
• Full year oil production averaged 76.7 MBbls per day
• 2020 total capital investment of $577.2 million; below guidance range
• Generated $904.2 million of net cash from operating activities
• $372 million of free cash flow¹ (non-GAAP) in 2020; $279 million of free cash flow after dividend¹ (non-GAAP) in 2020

Cimarex Energy Co. XEC today reported net income for fourth quarter 2020 of $24.7 million, or $0.25 per share, compared to a net loss of $384.1 million, or $3.87 per share, in the same period a year ago. For the full year, Cimarex reported a net loss of $1,967.5 million, or $19.73 per share, compared to 2019 net loss of $124.6 million, or $1.33 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 2020 adjusted net income (non-GAAP) was $91.3 million, or $0.89 per share, compared to adjusted net income (non-GAAP) of $120.4 million, or $1.18 per share in the same period a year ago¹.  Full year 2020 adjusted net income (non-GAAP) was $142.2 million, or $1.39 per share, compared to $448.8 million, or $4.46 per share  in 2019¹.  Adjusted cash flow from operations (non-GAAP) was $256.6 million in fourth quarter 2020 compared to $416.0 million in the same period a year ago¹.  Full year 2020 adjusted cash flow from operations (non-GAAP) was $944.2 million compared to $1.46 billion in 2019¹. 

Oil volumes in the fourth quarter were sequentially lower, averaging 67.8 thousand barrels (MBbls) per day.  For the full year, Cimarex reported average daily oil volumes of 76.7 MBbls, an 11 percent year-over-year decrease.  Cimarex produced 229.5 thousand barrels of oil equivalent (MBOE) per day in the fourth quarter and averaged 252.5 MBOE per day for the year.

In the fourth quarter realized oil prices averaged $40.09 per barrel, down 27 percent from the $54.80 per barrel received in the fourth quarter of 2019.  Realized natural gas prices averaged $1.69 per thousand cubic feet (Mcf), up 42 percent from the fourth quarter 2019 average of $1.19 per Mcf.  NGL prices averaged $14.02 per barrel, down one percent from the $14.13 per barrel received in the fourth quarter of 2019.  For the full year, Cimarex realized $35.59 per barrel of oil, down 33 percent from 2019, $1.05 per Mcf of natural gas and $10.53 per barrel of NGLs sold.

Realized oil and natural gas price differentials to WTI Cushing and Henry Hub improved year-over-year.  Our realized Permian oil differential to WTI Cushing averaged $(3.74) per barrel in 2020 compared to $(4.48) in 2019.  For the year, Cimarex's average differential on its Permian natural gas production was $(1.39) per Mcf compared to the Henry Hub index versus $(2.14) per Mcf in 2019.  Cimarex's 2020 realized gas price differential in the Mid-Continent region was $(0.41) per Mcf compared to Henry Hub versus $(0.68) in 2019.

Cimarex invested a total of $577.2 million in 2020, which includes exploration and development capital (E&D) of $544.9 million,  $20.8 million to saltwater disposal and $11.5 million to midstream and other investments.  E&D capital is comprised of $417.4 million attributable to drilling and completion (D&C) activities and $127.5 million for capitalized interest and overhead, production capital and leasehold acquisition.  Capital investments were funded with cash flow from operations. 

Proved reserves at December 31, 2020 totaled 531 million barrels of oil equivalent (MMBOE), down 14 percent year over year.  The decrease in proved reserves resulted from a reduction in drilling activity and negative price related revisions, both due to lower commodity prices.  Cimarex added 57 MMBOE through extensions and discoveries while revisions reduced proved reserves by 52 MMBOE.  Production for 2020 totaled 92 MMBOE. Proved reserves are 84 percent proved developed.

Total debt at December 31, 2020 consisted of $2.0 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $273.1 million at year-end.

Cimarex repurchased and canceled 34,335 shares (55 percent) of the outstanding 8.125% Series A Cumulative Perpetual Convertible Preferred Stock in the fourth quarter, for a total consideration of $43.5 million including accrued and unpaid dividends. 

Operations Update
Cimarex invested $577.2 million in 2020 including $417.4 million (72 percent) of D&C capital.  Also included is $20.8 million to saltwater disposal assets and $11.5 million to midstream.  Of the $577.2 million, 93 percent was invested in the Permian region and seven percent in the Mid-Continent.

During 2020, Cimarex participated in the drilling and completion of 149 gross (51.0 net) wells.  At year-end, 77 gross (39.6 net) wells were waiting on completion, of which 25 gross (0.5 net) were in the Mid-Continent and 52 gross (39.1 net) were in the Permian.  Cimarex is currently operating six drilling rigs and two completion crews.

Permian Region
Production from the Permian region averaged 166.9 MBOE per day in the fourth quarter, or 73 percent of total company volumes.  Oil volumes averaged 60.0 MBbls per day, 88 percent of total company oil volumes.  For the full year, production averaged 184.0 MBOE per day, 73 percent of total company volumes with Permian oil representing 88 percent of Cimarex's oil volumes in 2020.

Cimarex brought 33 gross (15.9 net) wells on production in the Permian during fourth quarter, bringing the total wells brought on production in 2020 to 92 gross (48.1 net).  About 97 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 9,268 feet in 2020. Cimarex is currently operating five drilling rigs and two completion crews in the region.

Mid-Continent Region
Production from the Mid-Continent averaged 62.2 MBOE per day for the fourth quarter, down 27 percent from fourth quarter 2019 and down 10 percent sequentially.  Oil volumes averaged 7.7 MBbls per day and represented 11 percent of the company's total oil volume in the quarter.  For the full year, production averaged 68.1 MBOE per day, down 22 percent year over year. Oil volumes averaged 8.8 MBbls per day in 2020, down 36 percent year over year.

Wells brought on production during the fourth quarter totaled 14 gross (1.2 net) in the Mid-Continent region, bringing the total wells brought on production in 2020 to 57 gross (2.9 net).  At the end of the quarter, 25 gross (0.5 net) wells were waiting on completion. Cimarex is currently operating one drilling rig in the region.

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 23, at 11:00 a.m. EST (9:00 a.m. MST) to discuss its fourth quarter and 2020 financial and operating results as well as management's outlook for 2021.  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 2020 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, 2019, filed with the SEC, the Annual Report on Form 10-K for the year ended December 31, 2020 to be 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, all of which may be amplified by the COVID-19 pandemic and its unpredictable nature, including among other things: fluctuations in the price we receive for our oil, gas, and NGL production, including local market price differentials, which may be exacerbated by the demand destruction resulting from COVID-19; disruptions to the availability of workers and contractors due to illness and stay at home orders related to the COVID-19 pandemic; cost and availability of gathering, pipeline, refining, transportation and other midstream and downstream activities and our ability to sell oil, gas, and NGLs, which may be negatively impacted by the COVID-19 pandemic, severe weather and other risks and lead to a lack of any available markets; availability of supply chains and critical equipment and supplies; higher than expected costs and expenses, including the availability and cost of services and materials; compliance with environmental and other regulations, including new regulations that may result from the recent change in federal and state administrations and legislatures; legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions, and disposal of produced water, which may be negatively impacted by the recent change in Presidential administration or legislatures; the ability to receive drilling and other permits or approvals and rights-of-way in a timely manner (or at all), which may be negatively impacted by the impact of COVID-19 restrictions on regulatory employees who process and approve permits, other approvals and rights-of-way and which may be restricted by new Presidential and Secretarial orders and regulation and legislation; reductions in the quantity of oil, gas, and NGLs sold and prices received because of decreased demand and/or curtailments in production relating to mechanical, transportation, storage, capacity, marketing, weather, the COVID-19 pandemic, or other problems; declines in the SEC PV10 value of our oil and gas properties resulting in full cost ceiling test impairments to the carrying values of our oil and gas properties; the effectiveness of our internal control over financial reporting; success of the company's risk management activities; availability of financing and access to capital markets; estimates of proved reserves, exploitation potential, or exploration prospect size; greater than expected production decline rates; timing and amount of future production of oil, gas, and NGLs; cybersecurity threats, technology system failures and data security issues; the inability to transport, process and store oil and gas; hedging activities and the viability of our hedging counterparties, many of whom have been negatively impacted by the COVID-19 pandemic; economic and competitive conditions; lack of available insurance; cash flow and anticipated liquidity; continuing compliance with the financial covenant contained in our amended and restated credit agreement; the loss of certain federal income tax deductions; litigation; environmental liabilities; new federal regulations regarding species or habitats; exploration and development opportunities that we pursue may not result in economic, productive oil and gas properties; drilling of wells; development drilling and testing results; performance of acquired properties and newly drilled wells; ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested; unexpected future capital expenditures; amount, nature, and timing of capital expenditures; proving up undeveloped acreage and maintaining production on leases; unforeseen liabilities associated with acquisitions and dispositions; establishing valuation allowances against our net deferred tax assets; potential payments for failing to meet minimum oil, gas, NGL, or water delivery or sales commitments; increased financing costs due to a significant increase in interest rates; risks associated with concentration of operations in one major geographic area; availability and cost of capital; title to properties; ability to complete property sales or other transactions; 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.