Cimarex Energy Reports Third Quarter 2014 Results

DENVER , Nov. 4, 2014 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2014 net income of $144.3 million , or $1.65 per diluted share. This compares to 2013 third quarter net income of $138.4 million or $1.59 per diluted share. Adjusted 2014 third quarter net income was $1.53 per diluted share(1). Third quarter 2014 adjusted cash flow from operations was $439.7 versus $394.0 million a year ago(1). Revenues from oil and gas sales for the third quarter totaled $636.5 million compared to $549.6 million in the same period of 2013.

Production volumes averaged 942 million cubic feet equivalent (MMcfe) per day in the third quarter, a 31 percent increase over third quarter 2013 output of 717 MMcfe per day. Oil production grew 10 percent to 43,376 barrels per day. Natural gas production increased 35 percent to 468 MMcf per day. Natural gas liquids (NGL) volumes of 35,627 barrels per day grew 59 percent. Third quarter 2014 production volumes were 50 percent natural gas, 27 percent oil and 23 percent NGL.

Third quarter production volumes were impacted by severe weather conditions in the Delaware Basin during September. Heavy rains and flooding negatively impacted third quarter production by approximately 15 to 20 MMcfe per day (42 percent oil). Partially offsetting this was better-than-expected production volumes from newly completed wells in the Mid-Continent.

Natural gas prices averaged $4.10 per thousand cubic feet (Mcf) in the quarter, up 10 percent year-over-year. Oil prices averaged $87.27 per barrel, down 15 percent, and NGL prices averaged $34.08 per barrel. (See table of Price and Production Data below.)

Total debt at September 30, 2014 , consisted of $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and had a cash balance of $564 million . Proceeds from property sales closed during the quarter totaled $454 million which, included $446 million from the sale of oil and gas properties and $8 million for gas gathering and processing assets.

2014 Outlook

After adjusting for property sales (25-30 MMcfe per day) and weather-related production and well completion delays, fourth quarter 2014 volumes are projected to average 930-955 MMcfe per day. Incorporating updated fourth quarter guidance, full year production is now estimated to average 864-870 MMcfe per day, a mid-point increase of 25 percent over 2013. At the midpoint, year-over-year oil and natural gas volumes are now projected to grow approximately 16 and 23 percent, respectively, and NGL volumes are expected to increase 45 percent.

Capital investment budgeted for exploration and development for 2014 remains unchanged at $1.95 billion . Expenses per Mcfe of production for 2014 are estimated to be:


	Production expense	$1.08 - $1.12
	Transportation, processing and other expense	0.61 - 0.65
	DD&A and ARO accretion	2.55 - 2.65
	General and administrative expense	0.23 - 0.27
	Taxes other than income (% of oil and gas revenue)	5.3 - 5.7%

Operations Update

Cimarex invested $460 million on exploration and development during the third quarter, bringing the total invested in 2014 to $1.4 billion . The Permian Basin has accounted for 72 percent of the capital investment year-to-date.

A total of 66 gross (36 net) wells were drilled during the quarter. At September 30 , 52 gross (34 net) wells were awaiting completion.


WELLS DRILLED AND COMPLETED BY REGION

		For the Three Months Ended		For the Nine Months Ended
		September 30,		September 30,
		2014	2013	2014	2013
	Gross wells
	Permian Basin	36	42	117	132
	Mid-Continent	30	67	106	154
	Other	-	3	2	5
		66	112	225	291
	Net wells
	Permian Basin	27	28	78	87
	Mid-Continent	9	21	43	56
	Other	-	3	1	4
		36	52	122	147
	% Gross wells completed as producers	98%	99%	99%	99%

Permian Basin Update

Production from the Permian Basin averaged 408.1 MMcfe per day in the third quarter, an increase of 16 percent over third quarter 2013 and a four percent increase sequentially. Quarterly oil volumes increased seven percent year-over-year to 34,299 barrels per day and accounted for 50 percent of the region's total production for the quarter.

Cimarex drilled and completed 36 gross (27 net) Permian Basin wells during the third quarter, bringing the total for 2014 to 117 gross (78 net) wells. Delays in completions, primarily the result of severe weather, caused an increase in the number of wells awaiting completion at September 30 , to 43 gross (32 net) wells from 22 gross (18 net) wells at June 30.

Year-to-date, 38 gross (19 net) New Mexico Bone Spring wells have been drilled and completed. Per well first 30-day average gross production from the Cimarex-operated wells averaged approximately 1,056 barrels of oil equivalent (BOE) per day (70 percent oil). Year-to-date Ward County, Texas , Third Bone Spring drilling totaled 11 gross (six net) wells with per well first 30-day average gross production rates of approximately 1,114 BOE per day (68 percent oil) from Cimarex-operated wells. Culberson County Bone Spring wells total 11 gross (seven net) year-to-date with per well first 30-day average gross production rates of approximately 1,190 BOE per day (50 percent oil).

In the Wolfcamp play, Cimarex continues to drill horizontal wells in multiple benches throughout its acreage in Culberson , Reeves and Ward Counties. In the third quarter, the company drilled and completed 15 gross (12 net) Wolfcamp wells. Of note, Cimarex has completed and is now producing from the third of its four downspacing pilots begun in 2014. The Cleveland pilot, which is a four-well, 80-acre Wolfcamp A downspacing test in Reeves County, Texas , had per well first 30-day average gross production rates of approximately 1,029 BOE per day (49 percent oil). Completion operations are underway on the fourth pilot which will also test downspacing in the Wolfcamp A in Reeves County .

Mid-Continent Update

Mid-Continent production averaged 517.9 MMcfe per day for the third quarter of 2014, a 53 percent increase over the third quarter 2013 average of 337.6 MMcfe per day. The Cana-Woodford area represented 406.1 MMcfe per day, or 78 percent of Mid-Continent production in the third quarter. Year-to-date Cimarex has drilled and completed 106 gross (43 net) wells in the region, 80 gross (36 net) of which were in the Cana-Woodford shale play.

Cimarex currently has four rigs operating in the Mid-Continent region, two of which are drilling Cana-Woodford infill development wells. One Meramec test is now drilling and three additional Meramec wells are in various stages of completion. At September 30 , nine gross (2.3 net) wells were awaiting completion.

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


	For the Three Months Ended		For the Nine Months Ended
	September 30,		September 30,
	2014	2013	2014	2013
Gas (MMcf per day)
Permian Basin	126.6	102.5	117.6	93.9
Mid-Continent	333.3	230.2	284.9	232.6
Other	8.5	14.1	9.2	13.8
	468.4	346.8	411.7	340.3

Oil (Bbls per day)
Permian Basin	34,299	31,993	33,090	29,343
Mid-Continent	8,158	5,801	7,166	5,944
Other	919	1,498	1,194	1,177
	43,376	39,292	41,450	36,464
NGL (Bbls per day)
Permian Basin	12,634	9,575	11,144	7,643
Mid-Continent	22,604	12,090	18,475	13,129
Other	389	708	532	778
	35,627	22,373	30,151	21,550
Total Equivalent (MMcfe per day)
Permian Basin	408.1	352.0	383.0	315.9
Mid-Continent	517.9	337.6	438.8	347.0
Other	16.4	27.2	19.5	25.5
	942.4	716.8	841.3	688.4

Other

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

Oil Contracts

Weighted Ave. Price

Period

Type

Bbl/day

Index(2)

Floor

Ceiling

Oct. 14 - Dec. 14

Collar

12,000

WTI

85.00

103.47

Gas Contracts

				Weighted Ave. Price
Period	Type	MMBTU/day	Index(2)	Floor		Ceiling
Oct. 14 - Dec. 14	Collar	80,000	PEPL	$	3.51	$	4.57
Oct. 14 - Dec. 14	Collar	60,000	PermEP	$	3.62	$	4.50

Cimarex accounts for commodity contracts using the mark-to-market (through income) accounting method. Cash settlements on oil and natural gas collars resulted in payments of $0.2 million and $6.0 million related to the third quarter and year-to-date, respectively.

Conference Call and Webcast

Cimarex will host a conference call tomorrow, November 5 , at 9:00 a.m. Mountain Time (11:00 a.m. Eastern Time ). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To participate in the live, interactive call, please dial 866-367-3053 five minutes before the scheduled start time (international callers dial 412-902-4216). A replay will be available for one week following the call by dialing 877-344-7529 (international callers dial 412-317-0088); conference I.D. 10054032. The replay will also be available on the company's website or via the Cimarex App.

Investor Presentation

For more details, please refer to the company's updated investor presentation available on the Cimarex website at www.cimarex.com.

About Cimarex Energy Co.

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

Forward-Looking Statements

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the company is providing revised "2014 Outlook", which contains projections for certain 2014 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, 2013 , 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 volatility; severe weather; the ability to complete property sales or other transactions; 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; costs and availability of third party facilities for gathering, processing, refining and transportation; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to hydraulic fracturing; higher than expected costs and expenses, including the availability and cost of services and materials; unexpected future capital expenditures; economic and competitive conditions; 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; declines in the values of our oil and gas properties resulting in impairments; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in concentrated geographic areas; the success of the company's risk management activities; title to properties; litigation; environmental liabilities; 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.

(1)	Adjusted net income and adjusted cash flow from operations are non-GAAP financial measures. See the tables below for a reconciliation of the related amounts.
(2)	WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange. PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index and PermEp is El Paso Permian Basin index both as quoted in Platt's Inside FERC.



RECONCILIATION OF ADJUSTED NET INCOME

			For the Three Months Ended				For the Nine Months Ended
			September 30,				September 30,
			2014		2013		2014		2013
			(in thousands, net of tax, except per share data)

Net income		$	144,315	$	138,370	$	431,412	$	357,862
	Mark-to-market (gain) loss on open derivative positions		(5,938)		2,969		1,852		(3,495)
	Gain on sale of midstream assets		(4,202)		-		(4,202)		(2,691)
Adjusted net income		$	134,175	$	141,339	$	429,062	$	351,676
Diluted earnings per share *		$	1.65	$	1.59	$	4.94	$	4.12
Adjusted diluted earnings per share *		$	1.53	$	1.62	$	4.91	$	4.05
Diluted shares attributable to common stockholders and participating securities			87,393		86,981		87,402		86,964
Estimated tax rates utilized			37.1%		37.2%		37.1%		37.2%

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

Management uses adjusted net income to evaluate the company's operational trends and performance relative to other oil and gas exploration and production companies.

Adjusted net income is more comparable to earnings estimates provided by research analysts.

* Earnings per share are based on actual figures rather than the rounded figures presented.



RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS

			For the Three Months Ended				For the Nine Months Ended
			September 30,				September 30,
			2014		2013		2014		2013
			(in thousands)
Net cash provided by operating activities		$	502,201	$	370,962	$	1,271,970	$	940,748
	Change in operating assets and liabilities		(62,453)		23,027		19,782		91,971
Adjusted cash flow from operations		$	439,748	$	393,989	$	1,291,752	$	1,032,719

Management believes that the non-GAAP measure of adjusted 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, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of cash flow from operating activities. 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,
			2014		2013		2014		2013

Gas:
	Total production (MMcf)		43,094		31,908		112,385		92,914
	Daily production (MMcf)		468		347		412		340
	Price (per Mcf) *	$	4.10	$	3.72	$	4.62	$	$3.73

Oil:
	Total production (Bbls)		3,990,590		3,614,865		11,315,817		9,954,625
	Daily production (Bbls)		43,376		39,292		41,450		36,464
	Price (per Bbl)	$	87.27	$	102.88	$	90.87	$	$93.81

NGLs:
	Total production (Bbls)		3,277,701		2,058,331		8,231,095		5,883,094
	Daily production (Bbls)		35,627		22,373		30,151		21,550
	Price (per Bbl) *	$	34.08	$	28.63	$	36.10	$	$28.57

Prior to 2014, our average realized prices for gas and NGLs were net of certain processing fees. Beginning in 2014, these fees are no longer included in realized prices. The resulting positive impact on gas prices for the three and nine months ended September 30, 2014 was $0.07 per Mcf and $0.08 per Mcf, respectively. The positive impact on NGL prices was $3.43 per Bbl and $3.60 per Bbl for the three and nine months ended September 30, 2014, respectively.

OIL AND GAS CAPITALIZED EXPENDITURES

			For the Three Months Ended				For the Nine Months Ended
			September 30,				September 30,
			2014		2013		2014		2013
			(in thousands)
	Acquisitions:
	Proved *	$	-	$	(246)	$	144,516	$	677
	Unproved		-		1,816		114,732		5,481
			-		1,570		259,248		6,158

	Exploration and development:
	Land and Seismic		34,697		59,035		143,891		127,064
	Exploration and development		424,861		328,655		1,280,036		1,059,546
			459,558		387,690		1,423,927		1,186,610

	Sale proceeds:
	Proved *		(271,954)		1,212		(272,177)		(36,667)
	Unproved		(174,403)		-		(175,303)		(1,041)
			(446,357)		1,212		(447,480)		(37,708)

		$	13,201	$	390,472	$	1,235,695	$	1,155,060

The negative amount in third quarter 2013 proved acquisitions and the positive amount in third quarter 2013 proved sales proceeds reflect net purchase price adjustments related to second quarter 2013 activity.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (unaudited)

				For the Three Months Ended				For the Nine Months Ended
				September 30,				September 30,
				2014		2013		2014		2013

			(in thousands, except per share data)

Revenues:
	Gas sales		$	176,539	$	118,824	$	519,139	$	346,492
	Oil sales			348,276		371,881		1,028,229		933,879
	NGL sales			111,701		58,922		297,128		168,106
	Gas gathering and other, net			13,224		11,709		41,129		32,972
				649,740		561,336		1,885,625		1,481,449
Costs and expenses:
	Depreciation, depletion, amortization and accretion			220,779		160,979		596,567		449,931
	Production			89,084		76,166		250,310		214,985
	Transportation, processing, and other operating			54,573		25,838		145,299		66,494
	Gas gathering and other			8,588		6,970		27,413		18,310
	Taxes other than income			33,510		31,104		99,454		84,039
	General and administrative			20,240		19,003		57,523		57,416
	Stock compensation			3,603		3,347		10,875		10,459
	(Gain) loss on derivative instruments, net			(9,229)		10,824		8,960		(1,233)
	Other operating, net			(181)		2,507		34		7,804
				420,967		336,738		1,196,435		908,205

Operating income				228,773		224,598		689,190		573,244

Other (income) and expense:
	Interest expense			19,751		12,945		48,524		38,228
	Amortization of deferred financing costs			1,128		1,009		3,121		3,044
	Capitalized interest			(10,005)		(7,286)		(25,870)		(23,868)
	Other, net			(11,123)		(2,263)		(22,207)		(13,637)

Income before income tax				229,022		220,193		685,622		569,477
Income tax expense				84,707		81,823		254,210		211,615

Net income			$	144,315	$	138,370	$	431,412	$	357,862

Earnings per share to common stockholders:

	Basic		$	1.65	$	1.59	$	4.94	$	4.12
	Diluted		$	1.65	$	1.59	$	4.94	$	4.12

Dividends per share			$	0.16	$	0.14	$	0.48	$	0.42

Shares attributable to common stockholders:
	Unrestricted common shares outstanding			85,643		85,213		85,643		85,213
	Diluted common shares			85,779		85,347		85,788		85,330

Shares attributable to common stockholders and participating securities:
	Basic shares outstanding			87,257		86,847		87,257		86,847
	Fully diluted shares			87,393		86,981		87,402		86,964

Comprehensive income:
	Net income		$	144,315	$	138,370	$	431,412	$	357,862
	Other comprehensive income:
		Change in fair value of investments, net of tax		(123)		302		(139)		401
	Total comprehensive income		$	144,192	$	138,672	$	431,273	$	358,263

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)

						For the Three Months Ended				For the Nine Months Ended
						September 30,				September 30,
						2014		2013		2014		2013
						(in thousands)

Cash flows from operating activities:
	Net income					$	144,315	$	138,370	$	431,412	$	357,862
	Adjustment to reconcile net income to net cash
		provided by operating activities:
			Depreciation, depletion, amortization and accretion				220,779		160,979		596,567		449,931
			Deferred income taxes				84,707		81,823		254,210		211,615
			Stock compensation				3,603		3,347		10,875		10,459
			(Gain) loss on derivative instruments				(9,229)		10,824		8,960		(1,233)
			Settlements on derivative instruments				(211)		(6,097)		(6,015)		(4,332)
			Changes in non-current assets and liabilities				563		3,312		(1,873)		9,102
			Amortization of deferred financing costs
				and other, net			(4,779)		1,431		(2,384)		(685)
	Changes in operating assets and liabilities:
			Receivables, net				18,611		(33,071)		(63,091)		(88,131)
			Other current assets				(6,928)		(5,041)		(26,110)		9,799
			Accounts payable and accrued liabilities				50,770		15,085		69,419		(13,639)
					Net cash provided by operating activities		502,201		370,962		1,271,970		940,748
Cash flows from investing activities:
	Oil and gas expenditures						(492,390)		(389,417)		(1,630,929)		(1,165,555)
	Sales of oil and gas assets						450,587		23,300		451,710		37,707
	Sales of other assets						7,927		95		8,178		31,252
	Other expenditures						(25,383)		(9,182)		(76,784)		(34,657)
					Net cash used by investing activities		(59,259)		(375,204)		(1,247,825)		(1,131,253)
Cash flows from financing activities:
	Net bank debt borrowings						-		8,000		(174,000)		150,000
	Proceeds from other long-term debt						-		-		750,000		-
	Financing costs incurred						(398)		(100)		(11,616)		(100)
	Dividends paid						(13,910)		(12,122)		(39,932)		(34,570)
	Issuance of common stock and other						6,468		8,463		10,529		10,168
					Net cash provided by (used in) financing activities		(7,840)		4,241		534,981		125,498
Net change in cash and cash equivalents							435,102		(1)		559,126		(65,007)
Cash and cash equivalents at beginning of period							128,555		4,532		4,531		69,538
Cash and cash equivalents at end of period						$	563,657	$	4,531	$	563,657	$	4,531

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
			September 30,		December 31,
			2014		2013
Assets				(in thousands, except share data)
Current assets:
	Cash and cash equivalents		$	563,657	$	4,531
	Receivables, net			430,702		367,754
	Oil and gas well equipment and supplies			93,012		66,772
	Deferred income taxes			13,544		16,854
	Derivative instruments			1,090		4,268
	Other current assets			8,532		8,960
		Total current assets		1,110,537		469,139
Oil and gas properties at cost, using the full cost method of accounting:
	Proved properties			13,842,214		12,863,961
	Unproved properties and properties under development,
		not being amortized		865,058		585,361
				14,707,272		13,449,322
	Less - accumulated depreciation, depletion and amortization			(8,049,016)		(7,483,685)
		Net oil and gas properties		6,658,256		5,965,637
Fixed assets, net				195,854		146,918
Goodwill				620,232		620,232
Other assets, net				59,215		51,209
			$	8,644,094	$	7,253,135
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	123,388	$	116,110
	Accrued liabilities			474,074		412,495
	Derivative instruments			156		389
	Revenue payable			218,025		154,173
		Total current liabilities		815,643		683,167
Long-term debt				1,500,000		924,000
Deferred income taxes				1,710,662		1,459,841
Other liabilities				187,815		163,919
		Total liabilities		4,214,120		3,230,927
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,
		87,248,508 and 87,152,197 shares issued, respectively		872		872
	Paid-in capital			1,988,257		1,970,113
	Retained earnings			2,439,794		2,050,034
	Accumulated other comprehensive income			1,051		1,189
				4,429,974		4,022,208
			$	8,644,094	$	7,253,135

SOURCE Cimarex Energy Co.

For further information: CONTACT : Karen Acierno - 303.285.4957 or Mark Burford - 303.295-3995, www.cimarex.com

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