Exhibit 99.1
CIMAREX REPORTS THIRD-QUARTER 2006 EARNINGS OF $1.11 PER SHARE
DENVER, Nov. 6 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC)
today reported third-quarter 2006 net income of $94.0 million, or $1.11 per
diluted share. This compares to third-quarter 2005 earnings of $64.1 million, or
$0.76 per diluted share.
Revenues from oil and gas sales in the third quarter of 2006 were $309.3
million, compared to $343.5 million in the same period of 2005. Third-quarter
2006 cash flow from operations totaled $241.7 million versus $217 million in the
same period of 2005(1).
Third-quarter 2006 gas prices decreased 19% to $6.35 per thousand cubic feet
(Mcf) and oil rose 12% to $66.57 per barrel from the same period of 2005.
Third-quarter 2006 oil and gas production averaged 447.5 million cubic feet
equivalent per day (MMcfe/d), as compared to 445.8 MMcfe/d for the same period a
year earlier. The current quarter's daily production was comprised of 338
million cubic feet of gas and 18,255 barrels of oil.
"Our quality reserve base continues to provide solid financial results and
our process of rationalizing peripheral assets continues," said F.H. Merelli,
Cimarex's Chairman, Chief Executive Officer and President. "Operational
challenges on several significant onshore producers and completion delays in the
Gulf of Mexico have affected production. Drilling results have been impacted by
increased service costs and by less than expected exploration success. All of
these factors force further high-grading of the drilling program and increased
emphasis on cost reductions."
Included in the current quarter's net income is an $18.3 million gain on
sale of certain limited partnership interests in oil and gas properties. Net
sales consideration received to date via distributions from these affiliated
partnerships totaled $57.9 million.
For the nine months ended September 30, 2006, Cimarex reported net income of
$287 million, or $3.41 per diluted share, up from the $159.9 million, or $2.63
per diluted share for the comparable period of 2005. Cash flow from operations
for the first nine months of 2006 totaled $704.7 million versus $450.4 million
in the same period of 2005(1). Nine month results for the prior year reflect the
impact of the Magnum Hunter merger beginning on June 7, 2005.
Capital
In the third quarter of 2006 we drilled 125 gross (81.0 net) wells and
exploration and development (E&D) expenditures totaled $249.7 million, up from
$192.9 million in the third quarter of 2005. We expect full-year 2006
exploration and development expenditures to approximate $1 billion.
Hedging
Cimarex has hedged a portion of its natural gas production through collars
covering calendar years 2007 and 2008 for 80,000 and 40,000 MMBtu per day,
respectively. The floor price protects our return on capital invested in certain
Mid-Continent drilling programs while still allowing participation in potential
price increases up to the ceiling. The prices in the table below are at the
Mid-Continent delivery point.
Mid-Continent
Weighted Average Price
----------------------
Period Commodity Volume/Day Settlement Floor Ceiling
- --------------- --------- ------------ ------------- ---------- ---------
2007 Gas 80,000 MMBtu Mid-Continent $ 7.00 $ 10.17
2008 Gas 40,000 MMBtu Mid-Continent $ 7.00 $ 9.90
Oil and gas collars assumed as part of the Magnum Hunter acquisition also
remain in place. These contracts have not been designated for hedge accounting
treatment. The following table summarizes the open contracts as of September 30,
2006:
NYMEX
Weighted Average Price
----------------------
Period Commodity Volume/Day Settlement Floor Ceiling
- --------------- --------- ------------ ------------- ---------- ---------
Oct 06 - Dec 06 Gas 20,000 MMBtu NYMEX $ 5.25 $ 6.30
Oct 06 - Dec 06 Oil 1,000 Bbl NYMEX $ 30.00 $ 35.85
Exploration and Development Activity
Cimarex drilled 429 gross (269.9 net) wells during the first nine months of
2006, with a completion rate of 92%. At the present time we have 27 operated
rigs running.
Mid-Continent
Cimarex drilled 235 gross (146.2 net) wells in the Mid-Continent region
during the first three quarters of 2006 realizing a 98% success rate.
Mid-Continent third quarter production volumes averaged 182.7 MMcfe/d, a two
percent increase over second-quarter 2006.
In the Texas Panhandle, principally targeting the Granite Wash formation at
depths of 11,000-14,000 feet, Cimarex drilled 61 gross (42.6 net) wells with a
97% success rate. Meaningful wells recently brought on production in the Texas
Panhandle area include the Webb 5-194 (100% working interest) at 3.6 MMcfe/d,
Webb 4-194 (75% working interest) at 3.4 MMcfe/d, Earp 3-60 (100% working
interest) at 2.7 MMcfe/d and the Earp 3-59 (75% working interest) at 2.4
MMcfe/d.
Exploitation activity in the Panoma gas field, also located in the Texas
Panhandle, consisted of drilling 75 (73.4 net) infill wells with a 100% success
rate. These wells target the Brown Dolomite formation at 2,200 feet. This
drilling has increased gross field production by 5.1 MMcfe/d.
In the Anadarko Basin of western Oklahoma, Cimarex drilled 71 gross (13.1
net) wells realizing a 99% success rate. Wells in this area generally target the
Red Fork and Clinton Lake/Atoka at depths of 12,000-15,000 feet. A notable
Clinton Lake well, the Patricia 1-29 (56% working interest), commenced
production averaging 6.5 MMcfe/d. In southern Oklahoma, Cimarex drilled 13 gross
(10.4 net) wells with an 85% success rate including the Eola Robberson field's,
Harmon Heirs 4-8H (100% working interest) producing at 2.0 MMcfe/d.
Cimarex currently has 11 operated rigs drilling in the Mid-Continent region.
Permian Basin
Permian Basin drilling for the first nine months of 2006 totaled 125 gross
(92.0 net) wells, 97% of which were completed as producers. Permian Basin
third-quarter 2006 production volumes averaged 130.2 MMcfe/d as compared to
137.6 MMcfe/d in the second quarter of 2006.
In southeast New Mexico, two wells the Laguna Deep 8 (94% working interest)
and the New Mexico DD State 3 (100% working interest) declined rapidly as a
result of smaller than anticipated reservoir size and/or water encroachment. Net
daily production from these two wells decreased 5.3 MMcfe/d from the second to
the third quarter of 2006. Year-to-date southeast New Mexico drilling totaled 43
gross (31.6 net) wells with a 93% success rate in the Morrow, Atoka and Strawn
formations. Initial production rates averaged 1.5 MMcfe/d. Notable wells in Eddy
County, New Mexico include the Ozley 25 (100% working interest) at 2.9 MMcfe/d,
White City 31 (100% working interest) at 2.7 MMcfe/d and the Parks 1 (62.5%
working interest) at 2.6 MMcfe/d.
In West Texas, a total of 70 gross (51.9 net) wells were drilled, of which
99% were successful. Included in the West Texas program is exploitation of the
Westbrook Unit (90% working interest) where 32 infill wells have been drilled
and completed in the Clearfork formation at 3,200 feet. Other geologic targets
in West Texas include the Devonian, Ellenburger, Bone Springs and Spraberry.
Cimarex has drilled or participated in 17 (5.8 net) Devonian wells in the Arbol
de Nada field, five gross (five net) Ellenburger wells in the Will-O field, and
four gross (1.8 net) Bone Springs wells in the War-Wink field.
Cimarex has 11 operated rigs drilling in the Permian Basin, six in southeast
New Mexico and five in West Texas.
Gulf Coast
Cimarex drilled 37 gross (21.2 net) Gulf Coast area wells during the first
nine months of 2006, realizing a 65% success rate. Gulf Coast third-quarter 2006
production volumes averaged 72.9 MMcfe/d as compared to 76.4 MMcfe/d in the
second quarter of 2006.
Net production from the Donald Harrington #1 (100% working interest) in
south Louisiana, Rich #1 (100% working interest) and the Galloway Gas Unit #1,
both in Liberty County Texas, cumulatively decreased 5.4 MMcfe/d from the second
to the third quarter of 2006. The decrease in production from these wells is a
result of increased water production in the primary zone, mechanical well bore
failure and natural decline.
Year-to-date Cimarex drilled or participated in 12 gross (7.7 net) Liberty
County wells, eight of which were successful. The Cimarex-operated Galloway Gas
Unit #2 (50% working interest) commenced production in July and is currently
producing 16 MMcfe/d. In the fourth quarter, first production is expected from
three Kate Dishman (60% working interest) wells at rates of 350 barrels of oil
per day each. In the Mississippi Salt Basin, Cimarex drilled the Blackstone #2
(100% working interest) to a total depth of 16,546 feet. Production commenced in
August at a rate of 5.5 Mcfe/d.
Cimarex has three operated rigs drilling in the onshore Gulf Coast area.
Gulf of Mexico
Third-quarter Gulf of Mexico production volumes averaged 51 MMcfe/d, up from
46 MMcfe/d in the second quarter of 2006. Shut-in production volumes related to
damage from last year's hurricanes decreased to approximated 1-2 MMcfe/d in the
third quarter from 10-15 MMcfe/d in the second quarter. In addition, 6 MMcfe/d
of production in the Main Pass area has been consistently curtailed because of
weather-related difficulties impacting barging operations. To prevent such
ongoing delays, work is proceeding to tie-in Main Pass oil production to a new
pipeline which is expected to be completed in early 2007.
Net volumes of 15-20 MMcfe/d from discoveries at Main Pass 185 (47% working
interest), Main Pass 187 (100% working interest) and Main Pass 200 (50% working
interest) are expected to begin in the first quarter of 2007. Cimarex will
resume drilling on its Main Pass operated blocks in November. However, Cimarex
has elected to market its operated Main Pass assets. The sales package includes
these three discoveries as well as interest in 40 total blocks and 15 billion
cubic feet equivalent of proved reserves.
Outlook
The following statements provide a summary of production and certain expense
projections for the remainder of 2006.
We estimate that fourth-quarter 2006 production volumes will range between
445-455 MMcfe/d, resulting in full-year 2006 volumes of 450-455 MMcfe/d.
Fourth-quarter volume estimates have been negatively impacted by Gulf Coast
operational issues, less than expected exploration success, delays in bringing
on Gulf of Mexico production and completion delays in the Permian Basin.
Expenses for the remainder of 2006 are expected to fall within the following
ranges:
Expenses ($/Mcfe):
Production expense $1.00 - $1.10
Transportation expense 0.11 - 0.14
DD&A and ARO accretion 2.60 - 2.70
General and administrative expense 0.25 - 0.28
Production taxes (% of oil and gas revenue) 7.0% - 8.0%
Conference call and web cast
Cimarex will host a follow-up conference call today at 11:00 a.m. Mountain
Time (1:00 p.m. Eastern Time). To access the live, interactive conference call,
please dial 877-715-5282 and reference call ID # 7985033 ten minutes before the
scheduled start time. A digital replay will be available for one week following
the live broadcast at 877-519-4471 by using the conference ID # 7985033. 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. These risks and uncertainties are more fully described in SEC
reports filed by Cimarex. While Cimarex makes these forward-looking statements
in good faith, management cannot guarantee that 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. See report
filed on form 10Q to be filed for the period ended September 30, 2006 for
further disclosures.
(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.
PRICE AND PRODUCTION DATA
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
Gas Production:
Total production - Mcf 31,096,190 31,074,792 94,428,972 69,853,736
Gas volume - Mcf per day 338,002 337,769 345,894 255,874
Gas price - per Mcf $ 6.35 $ 7.88 $ 6.60 $ 6.99
Oil Production (including NGL):
Total production - barrels 1,679,470 1,656,194 4,818,606 3,269,132
Oil volume - barrels per day 18,255 18,002 17,651 11,975
Oil price - per barrel $ 66.57 $ 59.45 $ 64.11 $ 54.40
OIL AND GAS CAPITALIZED COSTS INCURRED
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(in thousands) (in thousands)
Exploration and development $ 249,718 $ 192,880 $ 804,599 $ 426,588
Acquisitions 566 (15,580) 7,710 1,821,048
Oil and gas expenditures 250,284 177,300 812,309 2,247,636
Sale proceeds * (4,450) (61,339) (4,450) (61,686)
$ 245,834 $ 115,961 $ 807,859 $ 2,185,950
* The September 30, 2006 amounts do not include consideration received
attributable to property sales by our limited partner affiliates.
RECONCILIATION OF CASH FLOW FROM OPERATIONS
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(in thousands) (in thousands)
Net cash provided by
operating activities $ 215,352 $ 218,269 $ 677,136 $ 417,475
Increase in operating
assets and liabilities 26,329 (1,236) 27,523 32,916
Cash flow from operations $ 241,681 $ 217,033 $ 704,659 $ 450,391
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.
CONDENSED INCOME STATEMENTS (unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(In thousands, except per share data)
Revenues:
Gas sales $ 197,460 $ 245,010 $ 622,841 $ 488,043
Oil sales 111,801 98,459 308,911 177,829
Gas gathering, processing,
and net marketing 13,621 19,625 39,761 23,224
322,882 363,094 971,513 689,096
Costs and expenses:
Depreciation, depletion and
amortization 104,904 82,826 290,305 172,493
Asset retirement obligation
accretion 1,977 1,331 4,918 2,266
Production 42,624 40,473 128,200 68,056
Transportation 5,845 4,237 15,636 10,319
Gas gathering and processing 7,325 13,750 20,264 15,612
Taxes other than income 22,912 21,418 68,392 45,913
General and administrative 10,804 8,418 31,679 23,967
Stock compensation, net 2,265 1,225 6,329 3,663
Expenses related to merger -- 1,402 (61) 8,087
(Gain) Loss on derivative
instruments (4,782) 81,946 (23,598) 83,976
193,874 257,026 542,064 434,352
Operating income 129,008 106,068 429,449 254,744
Other (income) and expense:
Interest expense net of
capitalized interest of
$6,726, $4,978, $18,555 and
$6,157, respectively 1,388 3,302 3,446 6,082
Amortization of fair
value of debt (947) (771) (2,838) (1,187)
Other, net (20,137) 3,456 (25,515) (700)
Income before income
tax expense 148,704 100,081 454,356 250,549
Income tax expense 54,747 36,006 167,382 90,632
Net income $ 93,957 $ 64,075 $ 286,974 $ 159,917
Earnings per share:
Basic $ 1.15 $ 0.78 $ 3.50 $ 2.72
Diluted $ 1.11 $ 0.76 $ 3.41 $ 2.63
Weighted average shares
outstanding:
Basic 82,052 82,284 82,062 58,815
Diluted 84,311 84,840 84,275 60,767
CONDENSED CASH FLOW STATEMENTS (unaudited)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
--------------------------- ---------------------------
2006 2005 2006 2005
------------ ------------ ------------ ------------
(In thousands)
Cash flows from operating
activities:
Net income $ 93,957 $ 64,075 $ 286,974 $ 159,917
Adjustment to reconcile net
income to net cash provided
by operating activities:
Depreciation, depletion
and amortization 104,904 82,826 290,305 172,493
Asset retirement
obligation accretion 1,977 1,331 4,918 2,266
Deferred income taxes 66,285 (3,475) 174,602 32,644
Stock compensation, net 2,265 1,225 6,329 3,663
Derivative instruments (8,744) 65,127 (39,200) 66,538
Gain on liquidation
of equity investees (18,322) -- (18,322) --
Other (641) 5,924 (947) 12,870
Changes in operating assets
and liabilities:
(Increase) decrease
in receivables, net (3,978) (41,106) 51,067 (23,765)
(Increase) decrease
in other current assets 1,270 (12,458) (9,454) (24,420)
Increase (decrease) in
accounts payable and
accrued liabilities (23,391) 54,213 (69,336) 15,081
Increase (decrease)
in other non-current
liabilities (230) 587 200 188
Net cash provided by
operating activities 215,352 218,269 677,136 417,475
Cash flows from investing
activities:
Oil and gas expenditures (260,368) (193,763) (802,155) (398,191)
Acquisition of oil and
gas properties (789) (1,271) (5,530) (1,973)
Merger related costs -- (25) (439) (12,405)
Cash received in connection
with acquisition of MHR -- -- -- 33,407
Proceeds from sale of assets 5,059 70,171 10,659 70,576
Distributions received from
equity investees 57,871 215 58,285 235
Other expenditures (8,154) (2,651) (23,212) (20,033)
Net cash used by
investing activities (206,381) (127,324) (762,392) (328,384)
Cash flows from financing
activities:
Borrowings (payments)
on long-term debt, net (3,000) (128,358) 50,000 (188,422)
Treasury stock acquired -- -- (11,016) --
Dividends paid (3,345) -- (10,006) --
Proceeds from issuance
of common stock and other 69 7,581 2,715 11,058
Net cash (used in)
provided by financing
activities (6,276) (120,777) 31,693 (177,364)
Net change in cash and cash
equivalents 2,695 (29,832) (53,563) (88,273)
Cash and cash equivalents
at beginning of period 5,389 57,305 61,647 115,746
Cash and cash equivalents
at end of period $ 8,084 $ 27,473 $ 8,084 $ 27,473
BALANCE SHEETS (unaudited)
September 30, December 31,
2006 2005
------------- -------------
(In thousands,
except share data)
Assets
Current assets:
Cash and cash equivalents $ 8,084 $ 61,647
Receivables, net 256,206 289,184
Inventories 46,233 34,784
Deferred income taxes 11,056 17,959
Derivative instruments, net 19,395 --
Other current assets 13,247 25,454
Total current assets 354,221 429,028
Oil and gas properties at cost, using
the full cost method of accounting:
Proved properties 4,348,788 3,602,797
Unproved properties and properties
under development, not being amortized 462,036 388,839
4,810,824 3,991,636
Less - accumulated depreciation,
depletion and amortization (1,392,650) (1,114,677)
Net oil and gas properties 3,418,174 2,876,959
Fixed assets, net 91,272 86,916
Goodwill 691,432 717,391
Derivative instruments 9,976 --
Other assets, net 38,780 70,041
$ 4,603,855 $ 4,180,335
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable $ 53,650 $ 81,947
Accrued liabilities 154,153 179,076
Derivative instruments -- 41,926
Revenue payable 99,594 94,469
Total current liabilities 307,397 397,418
Long-term debt 399,613 352,451
Deferred income taxes 867,724 717,790
Other liabilities 122,436 117,223
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,
83,928,841 and 83,524,285 shares
issued, respectively 839 835
Treasury stock, at cost, 1,078,822
and 1,146,822 shares held, respectively (40,628) (43,554)
Paid-in capital 1,864,054 1,865,597
Unearned compensation -- (15,862)
Retained earnings 1,062,011 788,356
Accumulated other comprehensive income 20,409 81
2,906,685 2,595,453
$ 4,603,855 $ 4,180,335
SOURCE Cimarex Energy Co.
-0- 11/06/2006
/CONTACT: Mark Burford, Director of Capital Markets of Cimarex Energy
Co., +1-303-295-3995/
/Web site: http://www.cimarex.com /