Company Announcements

Cimarex Energy Co. Reports Second-Quarter 2021 Results

DENVER, Aug. 5, 2021 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported second-quarter 2021 financial and operating results. Net income for second-quarter 2021 totaled $113.4 million, or $1.10 per share. Net income for the quarter was impacted by a mark-to-market loss on the Company's commodity derivative positions of $125.7 million. Excluding the impact of the mark-to-market loss on commodity derivatives, adjusted net income (non-GAAP) for second-quarter 2021 was $215.6 million, or $2.09 per share.

Highlights

  • Generated cash flow from operating activities of $364 million.
  • Adjusted cash flow from operating activities (non-GAAP) totaled $394 million, exceeding capital expenditures and generating $195 million of free cash flow (non-GAAP).
  • Delivered oil volumes of 72.7 MBopd.
  • Provided comprehensive environmental and safety performance data for 2020 on Cimarex's website; data highlights the Company's continued investment and progress in reducing emissions, decreasing water intensity and enhancing safety efforts.
  • Announced merger with Cabot Oil & Gas, creating a premier energy company that will be well positioned to deliver through-cycle returns on and of capital.

Outlook

  • Re-affirm Cimarex's full-year 2021 total capital expenditures guidance range of $650 million to $750 million, which is expected to drive fourth-quarter 2021 oil volume growth of more than 30% year-over-year.

See "Supplemental Non-GAAP Financial Measures" below for descriptions of the above non-GAAP measures as well as reconciliations of these measures to the associated GAAP measures.

Tom Jorden, Chairman and Chief Executive Officer, commented, "Our team delivered solid results, with oil production at the high-end of our expectations and cumulative free cash flow generation of $426 million in the first half of 2021. Additionally, we continued to make important progress on our ESG initiatives and minimizing our environmental footprint, including continuing to reduce our total Scope 1 GHG emissions."

"Looking ahead, the merits of our merger with Cabot are clear and compelling. The combination brings together two world-class portfolios to form a stronger, more resilient company that is well positioned to deliver value for shareholders. The transaction is proceeding on track, and we expect to close in the fourth quarter of this year."

Second-Quarter 2021 Summary

Second-quarter 2021 oil production totaled 72.7 thousand barrels per day (MBopd). Total production for the quarter averaged 237.1 thousand barrels of oil equivalent per day (MBoepd).

Cimarex's average realized price for oil, natural gas and NGLs for second-quarter 2021, excluding the effect of commodity derivatives, was $32.38 per Boe, compared with $10.32 per Boe for the same period a year ago.

Generated Strong Cash Flow

For second-quarter 2021, cash flow from operating activities was $363.7 million, including $30.4 million in working capital changes. Adjusted cash flow from operating activities (non-GAAP) was $394.0 million, exceeding second-quarter 2021 capital expenditures of $198.8 million, which included $168.4 million for drilling and completion activity. Free cash flow (non-GAAP) for second-quarter 2021 totaled $195.3 million.

During second-quarter 2021, Cimarex closed its previously announced agreements to sell non-core assets in the Permian Basin and Mid-Continent for a combined total of approximately $115 million. The divestitures include more than 3,000 gross wells in aggregate producing approximately 0.9 MBopd. There is no update to the Company's guidance as a result of these transactions.

Strong Financial Position

Cimarex maintains a strong financial position with substantial liquidity and investment-grade credit ratings. At the end of the reporting period, Cimarex had long-term debt of $2 billion, with no outstanding debt maturities until June 2024 and no debt outstanding under its credit facility. Driven by strong cash flow generation in second-quarter 2021, Cimarex's cash balance increased to $799 million at quarter end, compared to $273 million at December 31, 2020.

Hedge Position

Cimarex's commodity derivatives strategy mitigates the Company's exposure to commodity price fluctuations. Please see the table under "Derivatives Information" below for detailed information about Cimarex's current derivatives positions.

Outlook

Cimarex is currently running five rigs in the Permian Basin, and plans to average two completions crews during the second half of 2021. Cimarex maintains its previously-announced guidance range for 2021 capital expenditures of $650 million to $750 million, which is expected to result in fourth-quarter 2021 oil production growth guidance of more than 30%, as compared to fourth-quarter 2020.

ESG Performance Foundational To Cimarex's Success

The Company continues to drive towards consistently improving its environmental performance. In 2020, Cimarex reduced its greenhouse gas (GHG) emissions intensity by 22%, and is targeting an incremental reduction between 8% and 12% in 2021. The Company also recently published 2020 environmental and safety performance results.

Highlights include:

  • 27% reduction in methane intensity rate,
  • 54% decline of our Permian Basin high-pressure flaring intensity, and
  • 73% recycled water utilization rate in Permian Basin completions operations.

Cimarex's full 2020 disclosures are available on the "Corporate Responsibility" section of our website.

Cabot Transaction Update

On May 24, 2021, Cimarex announced that it has entered into a definitive agreement whereby Cimarex will combine with Cabot Oil & Gas Corporation (NYSE: COG) in an all-stock merger. This transaction is expected to create a premier energy company with top-tier assets, more resilient free cash flow generation through cycles and a commitment to leading returns of capital, targeting returns of more than 50% of quarterly free cash flow, with the capacity and confidence to distribute more than 30% of cash flow from operations at all but the lowest commodity price levels. The completion of the transaction, which is expected to occur fourth-quarter 2021, remains subject to the approval of Cimarex and Cabot stockholders and the satisfaction of other customary closing conditions.

Second-Quarter 2021 Conference Call

Cimarex will host a conference call today, August 5, 2021 at 9:00 AM MT (11:00 AM ET) to discuss second-quarter 2021 financial and operational results.

Conference Call Information

Date: Thursday, August 5, 2021
Time: 11:00 AM ET / 9:00 AM MT
Dial-in (for callers in the U.S.): (866) 367-3053
Dial-in (for callers in Canada): (855) 669-9657
International dial-in: (412) 902-4216

The live audio webcast and related earnings presentation can be accessed on the "Events & Presentations" page under the "Investor Relations" section of the Company's website at www.cimarex.com. The webcast will be archived and available at the same location after the conclusion of the live event.

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. For more information about Cimarex, visit www.cimarex.com.

Cautionary Statement Regarding Forward-Looking Information

This communication contains certain forward-looking statements within the meaning of federal securities laws. Words such as anticipates, believes, expects, intends, plans, outlook, will, should, may and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Cabot's and Cimarex's current views about future events. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger involving Cabot and Cimarex, including future financial and operating results; Cabot's and Cimarex's plans, objectives, expectations and intentions; the expected timing and likelihood of completion of the transaction; the expected timing and amount of any future dividends; and other statements that are not historical facts, including estimates of oil and natural gas reserves and resources, estimates of future production, assumptions regarding future oil and natural gas pricing, planned drilling activity, future results of operations, projected cash flow and liquidity, the achievement of synergies, business strategy and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this communication will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, without limitation, the ability to obtain the requisite Cabot and Cimarex stockholder approvals; the risk that an event, change or other circumstances could give rise to the termination of the proposed merger; the risk that a condition to closing of the merger may not be satisfied on a timely basis or at all; the length of time necessary to close the proposed transaction, which may be longer than anticipated for various reasons; the risk that the businesses will not be integrated successfully; the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected; the risk that any announcement relating to the proposed transaction could have adverse effects on the market price of Cabot's common stock or Cimarex's common stock; the risk of litigation related to the proposed transaction; the effect of future regulatory or legislative actions on the companies or the industry in which they operate, including the risk of new restrictions with respect to well spacing, hydraulic fracturing, natural gas flaring or other oil and natural gas development activities; the risk that the credit ratings of the combined business may be different from what the companies expect; disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers; the diversion of management time on merger-related issues; the volatility in commodity prices for crude oil and natural gas; the continuing effects of the COVID-19 pandemic and the impact thereof on Cabot's and Cimarex's businesses, financial condition and results of operations; actions by, or disputes among or between, the Organization of Petroleum Exporting Countries and other producer countries; the presence or recoverability of estimated reserves; the ability to replace reserves; environmental risks; drilling and operating risks; exploration and development risks; competition; the ability of management to execute its plans to meet its goals; and other risks inherent in Cabot's and Cimarex's businesses. In addition, the declaration and payment of any future dividends, whether regular base quarterly dividends, variable dividends or special dividends following completion of the proposed transaction, will depend on the combined business financial results, cash requirements, future prospects and other factors deemed relevant by the board of directors of Cabot (as then constituted). These risks, as well as other risks related to the proposed transaction, are described in the registration statement on Form S-4 and preliminary joint proxy statement/prospectus that was filed with the SEC and the definitive joint proxy statement/prospectus if and when it becomes available in connection with the proposed transaction. While the list of factors presented here is, and the list of factors to be presented in the registration statement on Form S-4 are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to: (1) Cabot's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, which are available on Cabot's website at www.cabotog.com/investorrelations and on the SECs website at http://www.sec.gov; and (2) Cimarex's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, which are available on its website at www.cimarex.com/investor-relations and on the SECs website at http://www.sec.gov.

Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Except to the extent required by applicable law, neither Cabot nor Cimarex undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

No Offer or Solicitation

This communication is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

Additional Information about the Merger and Where to Find It

In connection with the proposed transaction, Cabot filed with the SEC a registration statement on Form S-4 on June 29, 2021, that includes a preliminary joint proxy statement of Cabot and Cimarex and that also constitutes a preliminary prospectus of Cabot. If and when the registration statement becomes effective and the joint proxy statement/prospectus is in definitive form, such joint proxy statement/prospectus will be sent to the stockholders of Cabot and Cimarex. Each of Cabot and Cimarex also intends to file other relevant documents with the SEC regarding the proposed transaction, including the definitive joint proxy statement/prospectus. The information in the preliminary joint proxy statement/prospectus is not complete and may be changed. This communication is not a substitute for the preliminary joint proxy statement/prospectus or registration statement or any other document that Cabot or Cimarex may file with the SEC. The definitive joint proxy statement/prospectus (if and when available) will be mailed to stockholders of Cabot and Cimarex. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS, THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS IF AND WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT CABOT, CIMAREX AND THE PROPOSED TRANSACTION. Investors and security holders are able to obtain free copies of the registration statement and preliminary joint proxy statement/prospectus and all other documents containing important information about Cabot, Cimarex and the proposed transaction, once such documents are filed with the SEC, including the definitive joint proxy statement/prospectus if and when it becomes available, through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Cabot may be obtained free of charge on Cabot's website at www.cabotog.com/investor-relations or by contacting Matt Kerin by email at matt.kerin@cabotog.com or by phone at 281-589-4642. Copies of the documents filed with the SEC by Cimarex may be obtained free of charge on Cimarex's website at www.cimarex.com/investor-relations.

Participants in the Solicitation

Cabot, Cimarex and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of Cabot, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in Cabot's proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the SEC on March 12, 2021, and Cabot's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 26, 2021. Information about the directors and executive officers of Cimarex, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in Cimarex's proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the SEC on March 26, 2021, and Cimarex's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 23, 2021. Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the proposed transaction by reading the preliminary joint proxy statement/prospectus, including any amendments thereto, as well as the definitive joint proxy statement/prospectus if and when it becomes available and other relevant materials to be filed with the SEC regarding the proposed transaction when such materials become available. Investors should read the preliminary joint proxy statement/prospectus, and the definitive joint proxy statement/prospectus if and when it becomes available, carefully before making any voting or investment decisions. You may obtain free copies of these documents from Cabot or Cimarex using the sources indicated above.

 

 

Operational Activity

The tables below provide a summary of operational activity, production volumes and price realizations by region for second-quarter 2021:


Wells Brought on Production by
Region


Three Months Ended

June 30,


Six Months Ended

June 30,



2021


2020


2021


2020

Gross wells









Permian Basin


44



17



52



52


Mid-Continent


9



20



14



39




53



37



66



91


Net wells









Permian Basin


21.7



11.1



28.7



30.9


Mid-Continent


0.5



1.4



0.5



1.7




22.2



12.5



29.2



32.6


 

Daily Production Volumes by Region


Three Months Ended

June 30,


Six Months Ended

June 30,



2021


2020


2021


2020

Permian Basin









Gas (MMcf)


379.6



417.8



369.5



433.4


Oil (Bbls)


65,785



68,791



63,894



74,198


NGL (Bbls)


46,408



47,291



42,788



48,111


Total Equivalent (MBOE)


175.5



185.7



168.3



194.5











Mid-Continent









Gas (MMcf)


203.2



237.3



201.5



240.7


Oil (Bbls)


6,704



9,063



6,604



9,502


NGL (Bbls)


20,531



20,068



19,556



21,089


Total Equivalent (MBOE)


61.1



68.7



59.7



70.7











Total Company









Gas (MMcf)


584.2



656.0



572.2



675.2


Oil (Bbls)


72,707



77,956



70,656



83,873


NGL (Bbls)


67,030



67,402



62,417



69,251


Total Equivalent (MBOE)


237.1



254.7



228.4



265.6


 

Average Realized Commodity Prices by
Region


Three Months Ended

June 30,


Six Months Ended

June 30,



2021


2020


2021


2020

Permian Basin









Gas ($ per Mcf)


2.36



0.62



3.15



0.35


Oil ($ per Bbl)


64.16



19.73



60.15



32.84


NGL ($ per Bbl)


22.66



6.78



22.15



7.83











Mid-Continent









Gas ($ per Mcf)


2.78



1.40



3.58



1.39


Oil ($ per Bbl)


63.96



18.32



60.00



31.83


NGL ($ per Bbl)


24.29



9.26



24.32



10.71











Total Company









Gas ($ per Mcf)


2.51



0.91



3.30



0.72


Oil ($ per Bbl)


64.11



19.57



60.12



32.74


NGL ($ per Bbl)


23.16



7.52



22.83



8.71


 

Derivatives Information

 

The table below summarizes the Company's outstanding derivative contracts as of August 5, 2021, for the periods indicated:




2021


2022



3Q


4Q


Total


1Q


2Q


3Q


4Q


Total

Gas Collars:

















PEPL (1)

















Volume (MMBtu/d)


90,000



90,000



90,000



80,000



40,000



20,000



20,000



39,781


Wtd Avg Floor


$

2.00



$

2.00



$

2.00



$

2.25



$

2.50



$

2.60



$

2.60



$

2.40


Wtd Avg Ceiling


$

2.42



$

2.42



$

2.42



$

2.73



$

3.07



$

3.27



$

3.27



$

2.95



















El Paso Permian (1)

















Volume (MMBtu/d)


70,000



70,000



70,000



60,000



40,000



20,000



20,000



34,849


Wtd Avg Floor


$

1.86



$

1.86



$

1.86



$

2.25



$

2.45



$

2.50



$

2.50



$

2.38


Wtd Avg Ceiling


$

2.22



$

2.22



$

2.22



$

2.74



$

3.01



$

3.15



$

3.15



$

2.93



















Waha (1)

















Volume (MMBtu/d)


100,000



100,000



100,000



90,000



50,000



30,000



20,000



47,260


Wtd Avg Floor


$

1.88



$

1.88



$

1.88



$

2.14



$

2.44



$

2.47



$

2.50



$

2.31


Wtd Avg Ceiling


$

2.23



$

2.23



$

2.23



$

2.59



$

2.94



$

3.00



$

3.12



$

2.80



















Oil Collars:

















WTI (2)

















Volume (Bbl/d)


40,000



40,000



40,000



34,000



27,000



18,000



8,000



21,668


Wtd Avg Floor


$

34.65



$

34.65



$

34.65



$

41.94



$

43.74



$

47.56



$

57.00



$

45.08


Wtd Avg Ceiling


$

44.37



$

44.37



$

44.37



$

54.06



$

56.34



$

59.52



$

72.43



$

57.62



















Oil Basis Swaps:

















WTI Midland (3)

















Volume (Bbl/d)


35,000



35,000



35,000



30,000



23,000



15,000



8,000



18,929


Wtd Avg Differential


$

(0.08)



$

(0.08)



$

(0.08)



$

0.20



$

0.22



$

0.20



$

0.05



$

0.19



















Oil Roll Differential Swaps:

















WTI (2)

















Volume (Bbl/d)


18,000



18,000



18,000



18,000



11,000



7,000





8,945


Wtd Avg Price


$

(0.10)



$

(0.10)



$

(0.10)



$

(0.10)



$

(0.01)



$

0.10



$



$

(0.03)




1.

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index, El Paso
Permian refers to El Paso Permian Basin index, and Waha refers to West Texas (Waha) Index, all as quoted in Platt's Inside FERC.

2.

WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

3.

Index price on basis swaps and oil roll differential swaps are WTI NYMEX less the weighted average WTI Midland
differential, as quoted by Argus Americas Crude.


 

Condensed Consolidated Balance Sheets

(unaudited)








June 30,

2021


December 31,
2020

Assets


(in thousands, except share and
per share information)

Current assets:





Cash and cash equivalents


$

799,315



$

273,145


Accounts receivable, net of allowance


474,170



332,485


Oil and gas well equipment and supplies


28,635



37,150


Derivative instruments


1,246



6,848


Other current assets


7,822



7,710


Total current assets


1,311,188



657,338


Oil and gas properties at cost, using the full cost method of accounting:





Proved properties


21,430,301



21,281,840


Unproved properties and properties under development, not being amortized


1,182,073



1,142,183




22,612,374



22,424,023


Less – accumulated depreciation, depletion, amortization, and impairment


(19,176,876)



(18,987,354)


Net oil and gas properties


3,435,498



3,436,669


Fixed assets, net of accumulated depreciation of $434,753 and $455,815, respectively


384,216



436,101


Derivative instruments


2,458



2,342


Deferred income taxes




20,472


Other assets


73,827



69,067




$

5,207,187



$

4,621,989


Liabilities, Redeemable Preferred Stock, and Stockholders' Equity





Current liabilities:





Accounts payable


$

79,350



$

44,290


Accrued liabilities


347,488



280,849


Derivative instruments


366,591



145,398


Revenue payable


216,889



130,637


Operating leases


57,665



59,051


Total current liabilities


1,067,983



660,225


Long-term debt principal


2,000,000



2,000,000


Less—unamortized debt issuance costs and discounts


(11,669)



(12,701)


Long-term debt, net


1,988,331



1,987,299


Deferred income taxes


54,248




Derivative instruments


16,167



17,749


Operating leases


111,325



134,705


Other liabilities


176,299



231,776


Total liabilities


3,414,353



3,031,754


Redeemable preferred stock - 8.125% Series A Cumulative Perpetual Convertible
Preferred Stock, $0.01 par value, 28,165 shares authorized and issued


36,781



36,781







Stockholders' equity:





Common stock, $0.01 par value, 200,000,000 shares authorized, 102,820,006 and
102,866,806 shares issued, respectively


1,028



1,029


Additional paid-in capital


3,172,652



3,211,562


Accumulated deficit


(1,417,627)



(1,659,137)


Total stockholders' equity


1,756,053



1,553,454




$

5,207,187



$

4,621,989


 

Condensed Consolidated Statements of Operations 

(unaudited)












Three Months Ended

June 30,


Six Months Ended

June 30,



2021


2020


2021


2020



(in thousands, except per share information)

Revenues:









Oil sales


$

424,175



$

138,817



$

768,879



$

499,797


Gas and NGL sales


274,554



100,261



599,952



198,742


Gas gathering and other


13,651



10,305



23,015



23,674




712,380



249,383



1,391,846



722,213


Costs and expenses:









Impairment of oil and gas properties




941,198





1,274,849















Depreciation, depletion, amortization, and accretion


113,247



196,615



228,399



416,425


Impairment of goodwill








714,447


Production


77,408



64,337



152,214



151,573


Transportation, processing, and other operating


59,285



53,282



122,892



108,204


Gas gathering and other


9,549



3,526



20,027



11,824


Taxes other than income


40,247



16,486



81,233



47,447


General and administrative


24,978



26,226



50,238



51,735


Stock compensation


7,878



6,747



16,427



13,141


Loss (gain) on derivative instruments, net


211,833



123,885



373,768



(103,055)


Other operating expense, net


8,050



130



7,117



381




552,475



1,432,432



1,052,315



2,686,971











Operating income (loss)


159,905



(1,183,049)



339,531



(1,964,758)











Other (income) and expense:









Interest expense


23,370



23,047



46,448



46,228


Capitalized interest


(11,386)



(12,939)



(22,951)



(26,121)


Other, net


(459)



3,496



(598)



2,625











Income (loss) before income tax


148,380



(1,196,653)



316,632



(1,987,490)


Income tax expense (benefit)


34,992



(271,506)



75,162



(288,061)


Net income (loss)


$

113,388



$

(925,147)



$

241,470



$

(1,699,429)











Earnings (loss) per share to common stockholders:









Basic


$

1.10



$

(9.28)



$

2.35



$

(17.05)


Diluted


$

1.10



$

(9.28)



$

2.35



$

(17.05)











Dividends declared per common share


$

0.27



$

0.22



$

0.54



$

0.44











Weighted-average number of shares outstanding:









Basic


100,194



99,880



100,160



99,861


Diluted


100,285



99,880



100,228



99,861


 

Condensed Consolidated Statements of Cash Flows

(unaudited)












Three Months Ended

June 30,


Six Months Ended

June 30,



2021


2020


2021


2020



(in thousands)

Cash flows from operating activities:









Net income (loss)


$

113,388



$

(925,147)



$

241,470



$

(1,699,429)


Adjustments to reconcile net income (loss) to net
cash provided by operating activities:









Impairment of oil and gas properties




941,198





1,274,849


Depreciation, depletion, amortization, and accretion


113,247



196,615



228,399



416,425


Impairment of goodwill








714,447


Deferred income taxes


34,550



(271,543)



74,720



(287,900)


Stock compensation


7,878



6,747



16,427



13,141


Loss (gain) on derivative instruments, net


211,833



123,885



373,768



(103,055)


Settlements on derivative instruments


(86,136)



63,941



(148,670)



107,055


Amortization of debt issuance costs and discounts


889



818



1,776



1,602


Changes in non-current assets and liabilities


(4,910)



4,609



(5,654)



7,019


Other, net


3,291



3,405



6,966



6,795


Changes in operating assets and liabilities:









Accounts receivable


(48,332)



85,010



(142,832)



204,615


Other current assets


(1,425)



1,519



(651)



1,495


Accounts payable and other current liabilities


19,399



(86,351)



120,865



(203,562)


Net cash provided by operating activities


363,672



144,706



766,584



453,497


Cash flows from investing activities:









Acquisition of oil and gas properties


2





(308)



(7,250)


Oil and gas capital expenditures


(168,299)



(152,510)



(298,306)



(411,330)


Other capital expenditures


(2,275)



(11,627)



(5,806)



(38,052)


Sales of oil and gas assets


113,634





118,669



830


Sales of other assets


221



1,007



606



1,188


Net cash used by investing activities


(56,717)



(163,130)



(185,145)



(454,614)


Cash flows from financing activities:









Borrowings of long-term debt




60,000





161,000


Repayments of long-term debt




(60,000)





(161,000)


Financing fees




(1,457)



(100)



(1,557)


Finance lease payments


(1,370)



(1,343)



(2,437)



(2,808)


Dividends paid


(28,161)



(23,616)



(51,210)



(45,209)


Employee withholding taxes paid upon the net
settlement of equity-classified stock awards


(2,191)



(24)



(2,191)



(189)


Proceeds from exercise of stock options


284





669




Net cash used by financing activities


(31,438)



(26,440)



(55,269)



(49,763)


Net change in cash and cash equivalents


275,517



(44,864)



526,170



(50,880)


Cash and cash equivalents at beginning of period


523,798



88,706



273,145



94,722


Cash and cash equivalents at end of period


$

799,315



$

43,842



$

799,315



$

43,842



 

Supplemental Non-GAAP Financial Measures

(unaudited)



Reconciliation of Net Income (Loss) to Adjusted Net Income and Adjusted Earnings per Share



The Company's presentation of adjusted net income and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income and adjusted earnings per share represent earnings (loss) and diluted earnings (loss) per share determined under GAAP without regard to certain non-cash and special items. The Company believes these measures provide useful information to analysts and investors for analysis of its operating results on a recurring, comparable basis from period to period. Adjusted net income and adjusted earnings per share should not be considered in isolation or as a substitute for earnings (loss) or diluted earnings (loss) per share as determined in accordance with GAAP and may not be comparable to other similarly titled measures of other companies.


The following table provides a reconciliation from the GAAP measure of net income (loss) to adjusted net income, both in total and on a per diluted share basis, for the periods indicated:


Three Months Ended

June 30,


Six Months Ended

June 30,


2021


2020


2021


2020


(in thousands, except per share data)









Net income (loss)

$

113,388



$

(925,147)



$

241,470



$

(1,699,429)


Impairment of oil and gas properties



941,198





1,274,849


Impairment of goodwill







714,447


Merger related costs

8,059





8,059




Mark-to-market loss on open derivative positions

125,697



187,826



225,098



4,000


Asset retirement obligation







2,800


Tax impact (1)

(31,566)



(256,289)



(55,258)



(289,653)


Adjusted net income

$

215,578



$

(52,412)



$

419,369



$

7,014


Diluted earnings (loss) per share

$

1.10



$

(9.28)



$

2.35



$

(17.05)


Adjusted diluted earnings per share*

$

2.09



$

(0.51)



$

4.08



$

0.07










Weighted-average number of shares outstanding:








Adjusted diluted**

102,918



102,114



102,898



102,122


______________________________________


(1)

Because the goodwill impairment is not deductible for tax purposes, the tax impact in the 2020 period is calculated using an effective tax rate determined by excluding goodwill from the effective tax rate calculation.



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:




a)

Management uses adjusted net income to evaluate the Company's operating performance between periods and to compare the Company's performance to other oil and gas exploration and production companies.


b)   

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



*  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 Cash Flow from Operating Activities (CFO) to Adjusted CFO and to Free Cash Flow


The Company provides adjusted CFO, which is a non-GAAP financial measure. Adjusted CFO represents net cash provided by operating activities as determined under GAAP without regard to changes in operating assets and liabilities. The Company believes adjusted CFO is an accepted measure of an oil and natural gas company's ability to generate cash to fund development and acquisition activities and service debt or pay dividends. Additionally, the Company provides free cash flow, which is a non-GAAP financial measure. Free cash flow is adjusted CFO in excess of oil and gas capital expenditures and other capital expenditures. The Company believes that free cash flow is useful to investors as it provides a measure to compare both cash flow from operating activities and oil and gas capital expenditures across periods on a consistent basis.


These non-GAAP measures should not be considered as alternatives to, or more meaningful than, net cash provided by operating activities as an indicator of operating performance.


The following table provides a reconciliation from the GAAP measure of net cash provided by operating activities to adjusted CFO and to free cash flow as well as free cash flow after dividend, for the periods indicated:


Three Months Ended

June 30,


Six Months Ended

June 30,


2021


2020


2021


2020


(in thousands)

Net cash provided by operating activities

$

363,672



$

144,706



$

766,584



$

453,497


Total changes in cash due to changes in operating
assets and liabilities (working capital):

30,358



(178)



22,618



(2,548)


Adjusted cash flow from operating activities

394,030



144,528



789,202



450,949










Oil and gas capital expenditures

(168,299)



(152,510)



(298,306)



(411,330)


Other capital expenditures

(2,275)



(11,627)



(5,806)



(38,052)


Change in capital accruals

(23,162)



72,637



(44,866)



88,853


Capitalized stock compensation, inventory, and other

(5,037)



7,815



(14,417)



2,613


Capital expenditures

(198,773)



(83,685)



(363,395)



(357,916)










Free cash flow

195,257



60,843



425,807



93,033


Dividends paid

(28,161)



(23,616)



(51,210)



(45,209)


Free cash flow after dividend

$

167,096



$

37,227



$

374,597



$

47,824


 

Reconciliation of Long-Term Debt to Net Debt


The Company defines net debt as debt less cash and cash equivalents. Net debt should not be considered as an alternative to, or more meaningful than, total debt, the most directly comparable GAAP measure. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. The Company believes this metric is useful to analysts and investors in determining the Company's leverage position because the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt.


June 30,
2021


December 31,
2020


(in thousands)

Long-term debt

$

2,000,000



$

2,000,000


Cash and cash equivalents

(799,315)



(273,145)


Net debt

$

1,200,685



$

1,726,855


 

Cision View original content:https://www.prnewswire.com/news-releases/cimarex-energy-co-reports-second-quarter-2021-results-301348945.html

SOURCE Cimarex Energy Co.