Cimarex Energy (CIMXP) 8-K Cimarex Reports First Quarter 2016 Results

Cimarex Reports First Quarter 2016 Results

Production Averaged 973 MMcfe per day; Up 3% Year-over-Year

DENVER, May 4, 2016 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported a first quarter 2016 net loss of $186.1 million, or $2.00 per share, primarily the result of a non-cash charge related to the impairment of oil and gas properties. The adjusted first quarter net loss was $36.9 million, or $0.40 per share⁽¹⁾. First quarter 2016 adjusted cash flow from operations was $81.6 million versus $186.9 million a year ago⁽¹⁾.

Total company production averaged 973 million cubic feet equivalent (MMcfe) per day during the first quarter, a three percent increase from first quarter 2015 and a one percent decrease sequentially. As anticipated, curtailments related to third party processing in the Permian Basin and weather negatively impacted first quarter volumes by 30 MMcfe per day.

Continued weakness in commodity prices impacted Cimarex's financial results for the quarter. Realized oil prices averaged $28.02 per barrel, down 34 percent versus a year ago and 25 percent sequentially. Realized natural gas prices were down 31 percent from first quarter 2015 and 13 percent sequentially to $1.92 per Mcf. NGL prices averaged $9.84 per barrel, down 37 percent from first quarter 2015 and down 23 percent sequentially. (See table of Average Realized Price by Region below.)

Cimarex invested $158 million in exploration and development during the first quarter which was funded with cash flow from operations and cash on hand. Total debt at March 31, 2016, consisted of $1.5 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $677 million. Debt was 36 percent of total capitalization⁽²⁾.

2016 Outlook

Cimarex now estimates total production volumes for 2016 to average 940–970 MMcfe per day, a midpoint decrease of three percent over 2015 volumes. Second quarter output is expected to average 935-965 MMcfe per day.

Cimarex projects 2016 exploration and development capital of approximately $650-$700 million. The $50 million increase in capital from prior guidance is primarily related to the completion of a six-section development of Woodford wells previously scheduled for early 2017 that is now anticipated to commence in October 2016. To a lesser extent, larger completion design, more non-operated activity and carryover drilling capital from 2015 also contributed to the increase.

Expenses per Mcfe of production for the remainder of 2016 are estimated to be:

Production expense	$0.80 -   0.90
Transportation, processing and other expense	0.45  -  0.55
DD&A and ARO accretion*	1.30  -  1.50
General and administrative expense	0.19  -  0.23
Taxes other than income (% of oil and gas revenue) *Excludes the potential impact of any future ceiling test writedowns.	5.5  -  6.0%

Operations Update

Cimarex invested $158 million in exploration and development during the first quarter, 53 percent in the Permian Basin and 46 percent in the Mid-Continent. We completed 22 gross (5 net) wells during the quarter. At March 31, 2016, 93 gross (44 net) wells were awaiting completion including 27 net wells associated with multi-well infill and spacing projects that are expected be completed in the second half of 2016. Cimarex is currently operating nine drilling rigs with a reduction to four rigs planned by the end of the second quarter.

WELLS BROUGHT ON PRODUCTION BY REGION
		For the Three Months Ended
		March 31,
		2016	2015
	Gross wells
	Permian Basin	7	42
	Mid-Continent	15	11
	Other	—	—
		22	53
	Net wells
	Permian Basin	3	30
	Mid-Continent	2	3
	Other	—	—
		5	33

Permian Region

Production from the Permian Basin averaged 477 MMcfe per day in the first quarter, a two percent decrease from first quarter 2015 and eight percent sequentially. Quarterly oil volumes decreased 15 percent year-over-year and five percent sequentially to 36,549 barrels per day and accounted for 46 percent of the region's total production for the quarter. Natural gas production increased 15 percent year-over-year but decreased six percent sequentially. NGL production was up seven percent over first quarter 2015 and down 19 percent sequentially.

During the first quarter Cimarex completed and brought on production seven gross (three net) wells in the Permian region. There were 25 gross (16 net) wells waiting on completion on March 31.

Mid-Continent

Production from the Mid-Continent averaged 493 MMcfe per day for the first quarter, an 11 percent increase over first quarter 2015 and seven percent sequentially. Natural gas production grew four percent both year-over-year and sequentially while crude oil volumes were up 24 percent over first quarter 2015 and nine percent sequentially. NGL volumes increased 23 percent over first quarter 2015 and 13 percent sequentially.

During the first quarter Cimarex completed and brought on production 15 gross (two net) wells in the Mid-Continent. At the end of the quarter, 68 gross (28 net) wells were waiting on completion.

Production by Region

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

DAILY PRODUCTION BY REGION
		For the Three Months Ended
		March 31,
		2016	2015
Permian Basin
	Gas (MMcf)	173.6	150.4
	Oil (Bbls)	36,549	43,089
	NGL (Bbls)	14,059	13,156
	Total Equivalent (MMcfe)	477.3	487.8
Mid-Continent
	Gas (MMcf)	298.4	287.0
	Oil (Bbls)	9,253	7,436
	NGL (Bbls)	23,148	18,762
	Total Equivalent (MMcfe)	492.8	444.1
Total Company
	Gas (MMcf)	472.9	445.8
	Oil (Bbls)	46,110	51,241
	NGL (Bbls)	37,263	32,242
	Total Equivalent (MMcfe)	973.1	946.7
AVERAGE REALIZED PRICE BY REGION
		For the Three Months Ended
		March 31,
		2016	2015
Permian Basin
	Gas ($ per Mcf)	1.96	2.75
	Oil ($ per Bbl)	28.22	42.48
	NGL ($ per Bbl)	7.93	13.50
Mid-Continent
	Gas ($ per Mcf)	1.91	2.75
	Oil ($ per Bbl)	27.07	42.23
	NGL ($ per Bbl)	10.99	17.26
Total Company
	Gas ($ per Mcf)	1.92	2.77
	Oil ($ per Bbl)	28.02	42.50
	NGL ($ per Bbl)	9.84	15.71

Other

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

Gas:	2Q16	3Q16	4Q16	1Q17	2Q17	Total
PEPL Collars (3)
Volume (MMBtu)	2,730,000	2,760,000	2,760,000	1,800,000	1,820,000	11,870,000
Wtd Avg Floor	$       2.32	$       2.32	$       2.32	$       2.13	$       2.13	$         2.26
Wtd Avg Ceiling	$       2.75	$       2.75	$       2.75	$       2.70	$       2.70	$         2.73
El Paso Perm Collars (3)
Volume (MMBtu)	3,030,000	2,760,000	2,760,000	2,700,000	2,730,000	13,980,000
Wtd Avg Floor	$       2.45	$       2.42	$       2.42	$       2.42	$       2.42	$         2.42
Wtd Avg Ceiling	$       2.90	$       2.87	$       2.87	$       2.97	$       2.97	$         2.91
Oil:
WTI Three-Way Collars (4)
Volume (Bbl)	273,000	276,000	276,000	-	-	825,000
Floor sold (put)	$     40.00	$     40.00	$     40.00	$          -	$          -	$       40.00
Floor purchased (put)	$     50.00	$     50.00	$     50.00	$          -	$          -	$       50.00
Ceiling sold (call)	$     60.00	$     60.00	$     60.00	-	-	$       60.00
WTI  Collars (4)
Volume (Bbl)	364,000	368,000	368,000	360,000	364,000	1,824,000
Wtd Avg Floor	$     35.00	$     35.00	$     35.00	$     35.00	$     35.00	$       35.00
Wtd Avg Ceiling	$     42.50	$     42.50	$     42.50	$     42.50	$     42.50	$       42.50

Conference call and webcast

Cimarex will host a conference call tomorrow, May 5, 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 participate in the live, interactive call, please dial 866-367-3053 five minutes before the scheduled start time (international callers dial 1-412-902-4216). The replay will be available on the Cimarex website or via the Cimarex App.

Investor Presentation

For more details on Cimarex's first quarter 2016 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 Mid-Continent and Permian Basin areas of the U.S.

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the company is providing revised "2016 Outlook", which contains projections for certain 2016 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, 2015, 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; declines in the values of our oil and gas properties resulting in impairments; 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; changes in estimates of proved reserves; compliance with environmental and other regulations; derivative and hedging activities; risks associated with operating in one major geographic area; 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 below for reconciliations of the related amounts.
(2)	Reconciliation of debt to total capitalization, which is a non-GAAP measure, is:  long-term debt of $1.5 billion divided by long-term debt of $1.5 billion plus stockholders' equity of $2.6 billion.
(3)	PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index and El Paso Perm is El Paso Permian Basin index both as quoted in Platt's Inside FERC.
(4)	WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

RECONCILIATION OF ADJUSTED NET INCOME (LOSS)
			For the Three Months Ended
			March 31,
			2016			2015
			(in thousands, net of tax, except per share data)
Net income (loss)		$	(186,131)		$	(414,941)
	Impairment of oil and gas properties		146,226			383,225
	Mark-to-market loss on open derivative positions		2,956			—
Adjusted net income (loss)		$	(36,949)		$	(31,716)
Diluted earnings (loss) per share		$	(2.00)		$	(4.84)
Adjusted diluted earnings (loss) per share		$	(0.40)		$	(0.37)
Diluted shares attributable to common stockholders and participating securities			93,000	*		85,770	*
Estimated tax rates utilized			36.5%			36.5%

Adjusted net income (loss) and adjusted diluted earnings (loss) per share excludes 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 earnings because:

a)	Management uses adjusted net income (loss) to evaluate the company's operational trends and performance relative to other oil and gas exploration and production companies.
b)	Adjusted net income (loss) is more comparable to earnings estimates provided by research analysts.
*	Participating securities and other dilutive shares are not included in the diluted share computation when a loss exists.

RECONCILIATION OF ADJUSTED CASH FLOW FROM OPERATIONS
			For the Three Months Ended
			March 31,
			2016		2015
			(in thousands)
Net cash provided by operating activities		$	85,060	$	113,173
	Change in operating assets and liabilities		(3,469)		73,772
Adjusted cash flow from operations		$	81,591	$	186,945

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 and dividends, 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.

OIL AND GAS CAPITALIZED EXPENDITURES
			For the Three Months Ended
			March 31,
			2016		2015
			(in thousands)
	Acquisitions:
	Proved	$	2,584	$	30
	Unproved		8,346		1,869
			10,930		1,899
	Exploration and development:
	Land and Seismic		11,162		22,690
	Exploration and development		147,022		285,527
			158,184		308,217
	Sale proceeds:
	Proved		(12,587)		(1,145)
	Unproved		(384)		—
			(12,971)		(1,145)
		$	156,143	$	308,971

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS) (unaudited)
				For the Three Months Ended
				March 31,
				2016		2015
			(in thousands, except per share data)
Revenues:
	Oil sales		$	117,573	$	196,005
	Gas sales			82,608		110,962
	NGL sales			33,352		45,600
	Gas gathering and other, net			7,067		8,435
				240,600		361,002
Costs and expenses:
	Impairment of oil and gas properties			230,132		603,599
	Depreciation, depletion, amortization and accretion			130,397		218,514
	Production			70,702		82,211
	Transportation, processing, and other operating			46,443		39,642
	Gas gathering and other			8,080		8,864
	Taxes other than income			13,839		21,981
	General and administrative			13,897		15,938
	Stock compensation			5,528		5,155
	(Gain) loss on derivative instruments, net			(428)		—
	Other operating, net			90		524
				518,680		996,428
Operating income (loss)				(278,080)		(635,426)
Other (income) and expense:
	Interest expense			19,895		20,137
	Amortization of deferred financing costs			910		1,119
	Capitalized interest			(4,904)		(9,417)
	Other, net			(1,650)		(3,585)
Income (loss) before income tax				(292,331)		(643,680)
Income tax expense (benefit)				(106,200)		(228,739)
Net income (loss)			$	(186,131)	$	(414,941)
Earnings (loss) per share to common stockholders:
	Basic		$	(2.00)	$	(4.84)
	Diluted		$	(2.00)	$	(4.84)
Dividends per share			$	0.08	$	0.16
Shares attributable to common stockholders:
	Unrestricted common shares outstanding			93,000		85,770
	Diluted common shares			93,000		85,770
Shares attributable to common stockholders and participating securities:
	Basic shares outstanding			N/A*		N/A*
	Fully diluted shares			N/A*		N/A*
Comprehensive income (loss):
	Net income (loss)		$	(186,131)	$	(414,941)
	Other comprehensive income (loss):
		Change in fair value of investments, net of tax		85		101
	Total comprehensive income (loss)		$	(186,046)	$	(414,840)

* Due to the net loss in the periods ended March 31, 2016 and 2015, shares of 94,824 and 87,682, respectively, which include participating securities, are not considered in the loss per share calculations.

CONDENSED CONSOLIDATED CASH FLOW STATEMENTS (unaudited)
						For the Three Months Ended
						March 31,
							2016		2015
						(in thousands)
Cash flows from operating activities:
	Net income (loss)					$	(186,131)	$	(414,941)
	Adjustment to reconcile net income (loss) to net cash
		provided by operating activities:
			Impairment of oil and gas properties				230,132		603,599
			Depreciation, depletion, amortization and accretion				130,397		218,514
			Deferred income taxes				(106,200)		(228,739)
			Stock compensation				5,528		5,155
			(Gain) loss on derivative instruments				(428)		—
			Settlements on derivative instruments				5,068		—
			Changes in non-current assets and liabilities				1,863		1,046
			Amortization of deferred financing costs
				and other, net			1,362		2,311
	Changes in operating assets and liabilities:
			Receivables, net				33,147		72,397
			Other current assets				11,982		9,894
			Accounts payable and other current liabilities				(41,660)		(156,063)
					Net cash provided by operating activities		85,060		113,173
Cash flows from investing activities:
	Oil and gas expenditures						(176,395)		(371,106)
	Sales of oil and gas assets and other assets						13,059		1,180
	Other capital expenditures						(9,477)		(18,848)
					Net cash used by investing activities		(172,813)		(388,774)
Cash flows from financing activities:
	Dividends paid						(15,104)		(13,947)
	Proceeds from exercise of stock options and other						114		4,618
					Net cash used in financing activities		(14,990)		(9,329)
Net change in cash and cash equivalents							(102,743)		(284,930)
Cash and cash equivalents at beginning of period							779,382		405,862
Cash and cash equivalents at end of period						$	676,639	$	120,932

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
			March 31,		December 31,
			2016		2015
Assets				(in thousands, except share data)
Current assets:
	Cash and cash equivalents		$	676,639	$	779,382
	Receivables, net			192,160		225,398
	Oil and gas well equipment and supplies			44,648		54,579
	Derivative instruments			11,868		10,745
	Other current assets			5,775		7,826
		Total current assets		931,090		1,077,930
Oil and gas properties at cost, using the full cost method of accounting:
	Proved properties			15,677,599		15,546,948
	Unproved properties and properties under development,
		not being amortized		466,497		440,166
				16,144,096		15,987,114
	Less – accumulated depreciation, depletion, amortization and impairment			(13,057,470)		(12,710,968)
		Net oil and gas properties		3,086,626		3,276,146
Fixed assets, net				227,343		230,009
Goodwill				620,232		620,232
Derivative instruments				422		501
Other assets, net				35,548		38,468
			$	4,901,261	$	5,243,286
Liabilities and Stockholders' Equity
Current liabilities:
	Accounts payable		$	39,241	$	66,815
	Accrued liabilities			229,787		247,508
	Derivative instruments			3,812		—
	Revenue payable			84,252		95,744
		Total current liabilities		357,092		410,067
Long-term debt:
	Principal			1,500,000		1,500,000
	Less – unamortized debt issuance costs			(13,789)		(14,380)
		Long-term debt, net		1,486,211		1,485,620
Deferred income taxes				246,553		352,705
Other liabilities				197,074		197,216
		Total liabilities		2,286,930		2,445,608
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,
		94,815,010 and 94,820,570 shares issued, respectively		948		948
	Paid-in capital			2,773,254		2,762,976
	Retained earnings (Accumulated deficit)			(160,397)		33,313
	Accumulated other comprehensive income			526		441
				2,614,331		2,797,678
			$	4,901,261	$	5,243,286

CONTACT: Cimarex Energy Co., Karen Acierno, 303-285-4957, www.cimarex.com