Exhibit 99.1
NEWS
CIMAREX ENERGY CO.
1700 Lincoln Street, Suite 1800
Denver, CO 80203
Phone: (303) 295-3995
[LOGO OF CIMAREX]
CIMAREX ENERGY REPORTS THIRD-QUARTER FINANCIAL RESULTS
DENVER, November 3, 2005 - Cimarex Energy Co. (NYSE: XEC) today announced
financial results for the quarter ended September 30, 2005.
Revenues from oil and gas sales rose 187% in the third quarter of 2005 to a
record $343.5 million, compared to $119.6 million in the same period of 2004.
Third-quarter 2005 cash flow from operations also reached a new all-time high,
totaling $217 million versus $87.7 million in the same period of 2004(1).
Including the previously announced $82 million ($0.61 per diluted share after
tax) mark-to-market charge associated with the change in fair market value of
open oil and gas derivative contracts, net income for the third quarter of 2005
was $64.1 million, or $0.76 per diluted share. This compares to third-quarter
2004 earnings of $39.2 million, or $0.91 per diluted share.
The $82 million pre-tax charge is associated with swaps and collars assumed as
part of the Magnum Hunter acquisition which do not qualify for hedge accounting.
The total charge includes both non-cash mark-to-market derivative losses as well
as cash settlements. Cash payments related to third-quarter settlements totaled
$15.6 million. Also during the quarter, Cimarex recorded a charge of
$6.5 million, or $0.05 per share after tax, for estimated future litigation
settlements.
For the nine month period ended September 30, 2005, Cimarex reported net income
of $159.9 million, or $2.63 per diluted share, up from $105.5 million, or $2.47
per diluted share, for the comparable period of 2004.
Oil and gas sales for the first three quarters of 2005 totaled $665.9 million,
up from $330.5 million during the corresponding period of 2004. Cash flow from
operations for the first nine months of 2005 increased to $450.4 million versus
$240.1 million during the comparable period of 2004(1).
- ----------
(1) Cash Flow from Operations is a non-GAAP financial measure that represents
Net Cash Provided By Operating Activities adjusted for the change in
operating assets and liabilities. See below for a reconciliation of the
related amounts.
The increases in oil and gas revenues, earnings and cash flow are due to higher
prices and record production volumes. Natural gas prices averaged $7.88 per
thousand cubic feet and oil averaged $59.45 per barrel for this quarter. The
increase in production is attributable to the addition of Magnum Hunter
operations in June 2005 and continued positive drilling results, partially
offset by hurricane related production disruptions in the Gulf of Mexico and
Gulf Coast regions.
PRODUCTION VOLUMES AND EXPENSES
- -------------------------------
Cimarex's third-quarter 2005 oil and gas production volumes increased by 102
percent over the same period a year earlier to 445.8 million cubic feet
equivalent per day (MMcfe/d). Gas production rose 92 percent to 337.8 MMcf/d and
oil volumes increased 145 percent to 18,002 barrels per day. Hurricane and other
storm related activity is estimated to have negatively impacted production by
23-28 MMcfe/d.
Third-quarter 2005 costs and expenses directly associated with exploration and
production activities (depreciation, depletion and amortization, production
expense, transportation and taxes other than income taxes) totaled $148.9
million versus $53.1 million during the third quarter of 2004. The increase in
costs and expenses is primarily a result of the Magnum Hunter acquisition.
Third-quarter 2005 lifting costs, which are comprised of production and
transportation costs, were $1.09 per thousand cubic feet equivalent (Mcfe)
versus $0.56 per Mcfe reported during the third quarter 2004. The increase in
lifting cost per unit of production is principally a result of the Magnum Hunter
acquisition and shut-in production volumes caused by the hurricanes.
CAPITAL
- -------
Exploration and development (E&D) expenditures during the third quarter of 2005
totaled $192.9 million, up from $58.5 million for the third quarter 2004. In the
third quarter of 2005, we participated in drilling 97 gross (51 net) wells, with
an overall success rate of 94%.
E&D capital expenditures for the first nine months of 2005 were $426.6 million,
up from $208.8 million during the first nine months of 2004. We drilled 300
gross (156 net) wells during the first three quarters of 2005, realizing a
success rate of 86%. Including E&D costs incurred by Magnum Hunter prior to the
merger, year to date 2005 expenditures incurred by both companies totaled $568
million. The preliminary projection for 2006 E&D spending is in the range of
$850-$950 million.
PROPERTY SALES/DEBT REDUCTION
- -----------------------------
During the third quarter Cimarex received net proceeds of $61.3 million from the
sale of various royalty interests. Current income taxes payable include $22.6
million related to this sale. Cimarex anticipates overall sales of oil and gas
properties in 2005 to total over $90 million. Proved reserves associated with
these properties approximates 21 billion cubic feet equivalent and related
production is 7.3 MMcfe/d.
Using proceeds from property sales and cash flow in excess of capital
investment, long-term debt was reduced by $128 million during the third quarter
to $405 million (face value).
OUTLOOK
- -------
Based on anticipated capital spending and numerous other factors related to
production volume forecasts including estimates for resumption of production
from the Gulf of Mexico disrupted by hurricane activity and incorporating
property sales, fourth-quarter 2005 aggregate production is expected to range
from 420 to 450 MMcfe/d (76% natural gas).
Approximately 50 MMcfe/d of production is currently shut-in, of which 46 MMcfe/d
is from the Gulf of Mexico and 4 MMcfe/d is from wells located in South
Louisiana. The timetable to restore full production is dependent on third party
infrastructure being repaired and brought back online. Assuming full resumption
of shut-in volumes by the end of the first quarter of 2006 and anticipated
capital spending, full-year 2006 production is expected to average 485 to 505
MMcfe/d.
Certain operating expenses for the fourth quarter of 2005 are expected to fall
within the following ranges summarized below:
Operating Expenses ($/Mcfe):
Production expense $ 0.95 - $ 1.05
Transportation expense 0.10 - 0.12
Depreciation, depletion and amortization 2.10 - 2.20
General and administrative expense 0.25 - 0.28
Production taxes (% of oil and gas revenue) 6.5% - 7.0%
CONFERENCE CALL AND WEB CAST
A conference call and web cast has been scheduled for today Thursday November,
3, 2005 at 11 a.m. Mountain Time (1:00 p.m. Eastern Time). To access the live,
interactive conference call, please dial 888-858-4710 ten minutes before the
scheduled start time. The listen-only web cast of the call will be accessible
via 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, Gulf Coast,
Permian Basin of West Texas and New Mexico and Gulf of Mexico areas of the U.S.
This communication contains statements that constitute forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. These statements are based on current expectations and beliefs and are
subject to a number of risks, uncertainties and assumptions that could cause
actual results to differ materially from those described in the forward-looking
statements. A number of factors could cause actual results to differ materially
from the projections, anticipated results or other expectations expressed in
this release and other risks that are described in SEC reports filed by Cimarex.
While Cimarex makes these forward-looking statements in good faith, neither
Cimarex nor its management can guarantee that the anticipated future results
will be achieved. Cimarex assumes no obligation and expressly disclaims any duty
to update the information contained herein except as required by law.
FOR FURTHER INFORMATION CONTACT
Cimarex Energy Co.
Mark Burford, Director of Capital Markets
303-295-3995
www.cimarex.com
PRICE AND PRODUCTION DATA
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
Gas Production:
Total production - Mcf 31,074,792 16,211,507 69,853,736 46,437,642
Gas volume - Mcf per day 337,769 176,212 255,874 169,480
Gas price - per Mcf $ 7.88 $ 5.63 $ 6.99 $ 5.52
Oil Production (including NGL):
Total production - barrels 1,656,194 676,906 3,269,132 1,957,281
Oil volume - barrels per day 18,002 7,358 11,975 7,143
Oil price - per barrel $ 59.45 $ 41.81 $ 54.40 $ 37.77
CAPITALIZED COSTS INCURRED
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
(in thousands) (in thousands)
Exploration and development $ 192,880 $ 58,534 $ 426,588 $ 208,783
Acquisition of Magnum Hunter (15,605) 1,819,075
Acquisitions of other proved properties 25 100 1,973 102
------------ ------------ ------------ ------------
Oil and gas expenditures 177,300 58,634 2,247,636 208,885
Sale Proceeds (61,339) (298) (61,686) (662)
------------ ------------ ------------ ------------
$ 115,961 $ 58,336 $ 2,185,950 $ 208,223
============ ============ ============ ============
RECONCILIATION OF CASH FLOW FROM OPERATIONS
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
(in thousands) (in thousands)
Net cash provided by operating activities $ 218,269 $ 112,285 $ 417,475 $ 255,106
Increase in operating assets
and liabilities (1,236) (24,569) 32,916 (15,044)
------------ ------------ ------------ ------------
Cash flow from operations $ 217,033 $ 87,716 $ 450,391 $ 240,062
============ ============ ============ ============
Management believes that the non-GAAP measure of 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. It is also used by professional research analysts in
providing investment recommendations pertaining to companies in the oil and gas
exploration and production industry.
INCOME STATEMENTS (unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
(In thousands, except per share data)
Revenues:
Gas sales $ 245,010 $ 91,333 $ 488,043 $ 256,529
Oil sales 98,459 28,299 177,829 73,927
Gas gathering, marketing, and processing 64,833 49,329 183,784 139,921
Other, net (3,925) 1,312 (1,114) 6,008
------------ ------------ ------------ ------------
404,377 170,273 848,542 476,385
------------ ------------ ------------ ------------
Costs and expenses:
Depreciation, depletion and amortization 82,826 32,048 172,493 89,220
Asset retirement obligation accretion 1,331 319 2,266 913
Transportation 4,237 2,696 10,319 7,544
Production 40,473 8,648 68,056 27,536
Taxes other than income 21,418 9,736 45,913 27,565
Gas gathering, marketing, and processing 58,958 48,495 176,172 138,081
General and administrative 8,418 5,398 23,967 15,040
Stock compensation 1,225 502 3,663 1,454
Expenses related to merger 1,402 -- 8,087 --
Loss on derivative instruments 81,946 -- 83,976 --
------------ ------------ ------------ ------------
302,234 107,842 594,912 307,353
------------ ------------ ------------ ------------
Operating income 102,143 62,431 253,630 169,032
Other income and expense:
Interest expense 8,280 290 12,239 866
Amortization of fair value of debt (771) -- (1,187) --
Capitalized interest (4,978) -- (6,157) --
Interest income and other (469) (232) (1,814) (421)
------------ ------------ ------------ ------------
Income before income tax expense 100,081 62,373 250,549 168,587
Income tax expense 36,006 23,191 90,632 63,070
------------ ------------ ------------ ------------
Net income $ 64,075 $ 39,182 $ 159,917 $ 105,517
============ ============ ============ ============
Earnings per share:
Basic $ 0.78 $ 0.94 $ 2.72 $ 2.55
============ ============ ============ ============
Diluted $ 0.76 $ 0.91 $ 2.63 $ 2.47
============ ============ ============ ============
Weighted average shares outstanding:
Basic 82,284 41,511 58,815 41,399
============ ============ ============ ============
Diluted 84,840 42,885 60,767 42,687
============ ============ ============ ============
CASH FLOW STATEMENTS (unaudited)
FOR THE THREE MONTHS ENDED FOR THE NINE MONTHS ENDED
SEPTEMBER 30 SEPTEMBER 30
--------------------------- ---------------------------
2005 2004 2005 2004
------------ ------------ ------------ ------------
(In thousands)
Cash flows from operating activities:
Net income $ 64,075 $ 39,182 $ 159,917 $ 105,517
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation, depletion and amortization 82,826 32,048 172,493 89,220
Asset retirement obligation accretion 1,331 319 2,266 913
Deferred income taxes (3,475) 15,600 32,644 42,899
Stock compensation 1,225 502 3,663 1,454
Loss on derivative instruments 65,127 -- 66,538 --
Other 5,924 65 12,870 59
Changes in operating assets and liabilities,
net of effects of the acquisition of
Magnum Hunter:
(Increase) decrease in receivables, net (41,106) 9,138 (23,765) (12,922)
(Increase) decrease in other current assets (12,458) 1,988 (24,420) (2,447)
Increase in accounts payable and
accrued liabilities 54,213 12,271 15,081 29,083
Increase in other non-current liabilities 587 1,172 188 1,330
------------ ------------ ------------ ------------
Net cash provided by operating activities 218,269 112,285 417,475 255,106
------------ ------------ ------------ ------------
Cash flows from investing activities:
Oil and gas expenditures (193,763) (77,626) (398,191) (205,925)
Acquisition of oil and gas properties (25) (100) (1,973) (102)
Merger related costs (1,271) -- (12,405) --
Cash received in connection with acquisition of MHR -- -- 33,407 --
Proceeds from sale of assets 70,171 314 70,576 766
Other expenditures (2,436) (4,692) (19,798) (8,078)
------------ ------------ ------------ ------------
Net cash used by investing activities (127,324) (82,104) (328,384) (213,339)
------------ ------------ ------------ ------------
Cash flows from financing activities:
Borrowings (payments) on long-term debt, net (128,358) -- (188,422) --
Financing costs (44) -- (1,414) --
Common stock reacquired and retired -- (593) (2,130) (714)
Proceeds from issuance of common stock 7,625 4,528 14,602 10,724
------------ ------------ ------------ ------------
Net cash (used in) provided by financing activities (120,777) 3,935 (177,364) 10,010
------------ ------------ ------------ ------------
Net change in cash and cash equivalents (29,832) 34,116 (88,273) 51,777
Cash and cash equivalents at beginning of period 57,305 58,081 115,746 40,420
------------ ------------ ------------ ------------
Cash and cash equivalents at end of period $ 27,473 $ 92,197 $ 27,473 $ 92,197
============ ============ ============ ============
BALANCE SHEETS (unaudited)
SEPTEMBER 30 DECEMBER 31
2005 2004
------------ ------------
(In thousands, except share data)
ASSETS
Current assets:
Cash and cash equivalents $ 27,473 $ 115,746
Receivables, net 250,193 103,989
Inventories 32,520 9,742
Deferred income taxes 16,098 2,149
Assets available for sale -- --
Other current assets 25,462 4,821
------------ ------------
Total current assets 351,746 236,447
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Oil and gas properties at cost, using the full cost method
of accounting:
Proved properties 3,450,018 1,596,704
Unproved properties and properties under development,
not being amortized 408,406 72,249
------------ ------------
3,858,424 1,668,953
Less - accumulated depreciation, depletion and amortization (1,032,735) (866,660)
------------ ------------
Net oil and gas properties 2,825,689 802,293
------------ ------------
Fixed assets, net 85,112 16,109
Goodwill 716,818 44,967
Other assets, net 69,140 5,630
------------ ------------
$ 4,048,505 $ 1,105,446
============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 61,113 $ 26,511
Accrued liabilities 190,102 77,362
Derivative fair value 94,124 --
Revenue payable 82,515 39,129
------------ ------------
Total current liabilities 427,854 143,002
------------ ------------
Long-term debt 438,396 --
------------ ------------
Deferred income taxes 633,057 225,285
------------ ------------
Other liabilities 122,257 36,447
------------ ------------
Stockholders' equity:
Preferred stock, $0.01 par value, 15,000,000 shares
authorized, no shares issued -- --
Common stock, $0.01 par value, 200,000,000 shares
authorized, 84,871,551 and 41,729,280 shares issued, respectively 849 417
Treasury stock, at cost, 2,475,725 shares held (93,236) --
Paid-in capital 1,916,505 250,248
Unearned compensation (17,205) (10,072)
Retained earnings 619,948 460,031
Accumulated other comprehensive income 80 88
------------ ------------
2,426,941 700,712
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$ 4,048,505 $ 1,105,446
============ ============