XEC - Cimarex Reports First Quarter 2019 Results

DENVER, May 8, 2019 /PRNewswire/ --

• Resolute acquisition closed
• Daily production averaged 258.9 MBOE; oil production averaged 79,415 barrels per day
• 2Q oil production expected to be up 4% sequentially at the midpoint of guidance
• Oil production expected to grow 18-30% year over year
• 2019 capital guidance unchanged

Cimarex Energy Co. (NYSE: XEC) today reported first quarter 2019 net income of $26.3 million, or $0.26 per share, compared to $186.3 million, or $1.96 per share, in the same period a year ago.  First quarter adjusted net income (non-GAAP) was $117.3 million, or $1.20 per share, compared to first quarter 2018 adjusted net income (non-GAAP) of $173.6 million, or $1.82 per share¹.  Net cash provided by operating activities was $250.1 million in the first quarter of 2019 compared to $383.1 million in the same period a year ago.  Adjusted cash flow from operations (non-GAAP) was $351.1 million in the first quarter of 2019 compared to $367.2 million in the first quarter a year ago¹.

On March 1, Cimarex closed the previously announced acquisition of Resolute Energy Corporation and began integrating the assets into the company.  On March 8, 2019, we issued $500 million of senior unsecured notes due 2029, which carry an interest rate of 4.375 percent. These notes essentially refinanced Resolute's $600 million 8.50 percent senior notes, which were redeemed as part of the closing of the acquisition.

Total company production volumes for the quarter averaged 258.9 thousand barrels of oil equivalent (MBOE) per day.  Oil production averaged 79,415 barrels (bbls) per day, up 22 percent from the same period a year ago and down less than one percent sequentially.

Realized product prices were down in the first quarter as compared to the same quarter a year ago.  Realized oil prices averaged $48.87 per barrel, down 18 percent from the $59.93 per barrel received in the first quarter of 2018.  Realized natural gas prices averaged $1.91 per thousand cubic feet (Mcf), down 16 percent from the first quarter 2018 average of $2.28 per Mcf.  NGL prices averaged $16.44 per barrel, down 19 percent from the $20.19 per barrel received in the first quarter of 2018.

Both oil and natural gas prices in the first quarter were negatively impacted by local price differentials although oil differentials improved from fourth quarter 2018 levels.  Our realized Permian oil differential to WTI Cushing averaged $6.90 per barrel in the quarter, compared to $3.12 per barrel in the first quarter of 2018 and $11.64 per barrel in the fourth quarter of 2018.  Cimarex's average differential to Henry Hub on its Permian natural gas production was $1.91 per Mcf in the first quarter of 2019 compared to $0.78 per Mcf in the first quarter of 2018 and $2.21 in the fourth quarter of 2018.  In the Mid-Continent region, the company's average differential to Henry Hub was $0.46 per Mcf versus $0.70 per Mcf in the first quarter of 2018 and $0.83 in the fourth quarter of 2018.

Cimarex invested $368 million in exploration and development (E&D) during the first quarter, of which $319 million is attributable to drilling and completion activities. First quarter investments were funded with cash flow from operations and cash on the balance sheet.  Total debt at March 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 $21 million.  Debt was 36 percent of total capitalization².

2019 Outlook
Second quarter 2019 production volumes are expected to average 263 - 275 MBOE per day with oil volumes estimated to average 79.5 - 85.5 MBbls per day, up four percent sequentially at the midpoint.  Total 2019 daily production volumes are now expected to average 260 - 275 MBOE per day, with annual oil volumes estimated to average 80.0 - 88.0 Mbbls per day.

Estimated 2019 exploration and development investment is $1.35 – 1.45 billion, unchanged from guidance given in February. Midstream investments are estimated to total $60-70 million in 2019.

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

Operations Update
Cimarex invested $368 million in E&D during the first quarter, 77 percent in the Permian Basin and 23 percent in the Mid-Continent.  Cimarex brought 38 gross (8 net) wells on production during the quarter.  At March 31, 131 gross (52 net) wells were waiting on completion.  Cimarex currently is operating nine drilling rigs.

Permian Region
Production from the Permian region averaged 168,008 BOE per day in the first quarter, a 47 percent increase from first quarter 2018.  Oil volumes averaged 64,969 barrels per day, a 30 percent increase from first quarter 2018 and up five percent sequentially.

Cimarex completed 12 gross (5 net) wells in the Permian region during the first quarter.  There were 56 gross (40 net) wells waiting on completion at March 31.  Cimarex currently is operating eight drilling rigs and three completion crews in the region.

Mid-Continent Region
Production from the Mid-Continent averaged 90,386 BOE per day for the first quarter, down one percent from first quarter 2018 and down 13 percent sequentially.

During the first quarter, Cimarex completed 26 gross (3 net) wells in the Mid-Continent region.  At the end of the quarter, 75 gross (12 net) wells were waiting on completion.  Cimarex currently is operating one drilling rig and one completion crew in the region.

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

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

Conference call and webcast
Cimarex will host a conference call tomorrow, May 9, at 11:00 a.m. EDT (9:00 a.m. MDT).  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 first 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; 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; 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.

www.cimarex.com

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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.

Adjusted net income and adjusted diluted earnings per share exclude 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 measures because:

* Does not include adjustments resulting from application of the "two-class method" used to determine earnings per share under GAAP.

** Reflects the weighted-average number of common shares outstanding during the period as adjusted for the dilutive effects of outstanding stock options.

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.

SOURCE Cimarex Energy Co.