Cimarex Reports Third Quarter 2019 Results

DENVER, Nov. 4, 2019 /PRNewswire/ --

• Oil production averaged 89.7 MBbls/d; up 8% sequentially
• 2019 Exploration & Development capital guidance range lowered to $1.3 - 1.4 billion
• Reduced per unit production expense 12% year-over-year

Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2019 net income of $40.5 million, or $0.39 per share, compared to $148.4 million, or $1.56 per share, in the same period a year ago.  Third quarter 2019 results were negatively impacted by a non-cash charge related to the impairment of oil and gas properties.  Third quarter adjusted net income (non-GAAP) was $92.9 million, or $0.91 per share, compared to third quarter 2018 adjusted net income (non-GAAP) of $189.6 million, or $1.99 per share¹.  Net cash provided by operating activities was $320.1 million in the third quarter of 2019 compared to $453.5 million in the same period a year ago.  Adjusted cash flow from operations (non-GAAP) was $360.7 million in the third quarter of 2019 compared to $388.7 million in the third quarter a year ago¹.

Oil production averaged 89.7 thousand barrels (MBbls) per day, up 40 percent from the same period a year ago and up eight percent sequentially.  Total company production volumes for the quarter averaged 287.1 thousand barrels of oil equivalent (MBOE) per day.

Realized product prices were down in the third quarter compared to the same quarter a year ago.  Realized oil prices averaged $52.71 per barrel, down 10 percent from the $58.25 per barrel received in the third quarter of 2018.  Realized natural gas prices averaged $0.88 per thousand cubic feet (Mcf), down 52 percent from the third quarter 2018 average of $1.84 per Mcf but up 76 percent sequentially.  NGL prices averaged $10.80 per barrel, down 58 percent from the $25.72 per barrel received in the third quarter of 2018.  See footnotes to the Average Realized Prices by Region table below for ASC 606 impact on realized prices.

Natural gas prices were negatively impacted by local price differentials.  Cimarex's average differential to Henry Hub on its Permian natural gas production was $1.83 per Mcf in the third quarter of 2019 compared to $1.25 per Mcf in the third quarter of 2018 and $3.10 in the second quarter of 2019.  In the Mid-Continent region, the company's average differential to Henry Hub was $0.66 per Mcf versus $0.94 per Mcf in the third quarter of 2018 and $0.86 in the second quarter of 2019.  Our realized Permian oil differential to WTI Cushing improved and averaged $3.76 per barrel in the quarter, compared to $14.34 per barrel in the third quarter of 2018 and $5.80 per barrel in the second quarter of 2019.

Production expense averaged $3.34 per BOE for the third quarter, down 12 percent compared to the same period a year ago and down five percent sequentially.

Cimarex invested $296 million in exploration and development (E&D) during the third quarter, of which $221 million is attributable to drilling and completion activities.  Cimarex invested $19 million in midstream assets during the quarter.  Third quarter investments were funded with cash flow from operating activities.  Total debt at September 30, 2019 consisted of $2.0 billion of long-term notes.  Cimarex had no borrowings under its revolving credit facility and a cash balance of $24 million.  Debt was 35 percent of total capitalization².

Outlook
Fourth quarter 2019 production volumes are expected to average 272 - 292 MBOE per day.  Oil volumes are estimated to average 86.0 - 92.0 MBbls per day in the fourth quarter, essentially flat sequentially at the midpoint, with Permian growth expected to outpace total company growth.  Total 2019 daily annual oil volumes are estimated to average 84.5 - 86.5 MBbls per day with total production volumes expected to average 274 - 278 MBOE per day, up three percent at the midpoint from previous guidance due primarily to higher than expected NGL recoveries.

Estimated 2019 exploration and development investment is $1.30 – 1.40 billion, down four percent at the midpoint from guidance given in February.  Midstream investments are estimated to total approximately $70 million in 2019.

Expenses per BOE of production for 2019 are estimated to be:

Cimarex Chairman and CEO, Tom Jorden, said, "We have seen strong execution in 2019, which we expect to continue into 2020.  Our initial planning indicates that we will generate meaningful free cash flow in 2020 using a flat $50 per barrel WTI price and NYMEX gas price of $2.50 per Mcf, adjusted for basis differentials."

Operations Update
Cimarex invested $296 million in E&D during the third quarter, 84 percent in the Permian Basin and 16 percent in the Mid-Continent.  Cimarex brought 96 gross (21 net) wells on production during the quarter.  At September 30, 79 gross (34 net) wells were waiting on completion.  Cimarex currently is operating eight drilling rigs.

Permian Region
Production from the Permian region averaged 198.6 MBOE per day in the third quarter, a 64 percent increase from third quarter 2018.  Oil volumes averaged 74.8 MBbls per day, a 53 percent increase from third quarter 2018 and up six percent sequentially.

Cimarex brought 44 gross (16 net) wells on production in the Permian region during the third quarter.  There were 43 gross (32 net) wells waiting on completion at September 30.  Cimarex currently is operating eight drilling rigs and two completion crews in the region.

Mid-Continent Region
Production from the Mid-Continent averaged 88.1 MBOE per day for the third quarter, down 10 percent from third quarter 2018 and up three percent sequentially.

During the third quarter, Cimarex brought 52 gross (5 net) wells on production in the Mid-Continent region.  At the end of the quarter, 36 gross (2 net) wells were waiting on completion.  Cimarex is not currently operating a drilling rig or completion crew in the Mid-Continent.

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

Other
Cimarex received cash settlements of $17.6 million related to its gas hedges during the quarter.  Settlement of oil hedges resulted in a cash payment of $15.9 million.

The following table summarizes the company's current open hedge positions:

Conference call and webcast
Cimarex will host a conference call tomorrow, November 5, at 11:00 a.m. EST (9:00 a.m. MST).  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 third quarter 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.

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the "2019 Outlook" contains projections for certain 2019 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, 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 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 levels and volatility; declines in the values of our oil and gas properties resulting in impairments; local commodity price differentials; derivative and hedging activities; higher than expected costs and expenses, including the availability and cost of services and materials; our ability to successfully integrate the business of the recently acquired Resolute Energy Corporation; unknown liabilities related to Resolute; 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; 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; 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 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

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.

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.