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Cimarex Reports Third-Quarter 2007 Earnings of $0.87 Per Share

Posted on: Wednesday, 7 November 2007, 06:00 CST

DENVER, Nov. 7 /PRNewswire-FirstCall/ -- Cimarex Energy Co. today reported third-quarter 2007 net income of $73.2 million, or $0.87 per diluted share. This compares to third-quarter 2006 earnings of $94.0 million, or $1.11 per diluted share.

Revenues from oil and gas sales in the third quarter of 2007 were $327.8 million, up from $309.3 million in the same period of 2006. Third-quarter 2007 cash flow from operations totaled $235.3 million versus $241.7 million in the same period of 2006(1).

Third-quarter 2007 oil and gas production volumes averaged 448.5 million cubic feet equivalent per day (MMcfe/d) versus 447.5 MMcfe/d in the third quarter of 2006. The latest quarter's average daily production was comprised of 325.2 million cubic feet of gas and 20,537 barrels of oil. Third-quarter 2007 realized gas prices increased 1% to $6.43 per thousand cubic feet (Mcf) and oil prices rose 8% to $71.63 per barrel.

For the nine month period ended September 30, 2007, Cimarex reported net income of $216.5 million, or $2.56 per diluted share, as compared to $287.0 million, or $3.41 per diluted share, for the first nine months of 2006. Cash flow from operations for the first nine months of 2007 totaled $687.0 million versus $704.7 million in the same period of 2006(1).

Capital

Third-quarter 2007 exploration and development expenditures totaled $234.2 million as compared to $249.7 million in the third quarter of 2006. In the third quarter of 2007 Cimarex drilled 120 gross (62 net) wells, completing 93% as producers. Exploration and development capital investment for 2007 is projected to be approximately $1 billion.

Property Sales/Acquisitions

During the nine months ended September 30, 2007, Cimarex closed property sales of $22.7 million. An additional $11 million property sale closed in October 2007. Total proved reserves associated with all of the closed sales approximate 10.4 billion cubic feet equivalent (Bcfe) and related production of 3.5 MMcfe/d. The properties are located in South Texas, North Dakota and California.

In the third quarter of 2007, Cimarex purchased Texas Panhandle properties for $36 million with 8 Bcfe of proved reserves, 5,200 net acres, and current daily production of 1.8 MMcfe/d. This acquisition adds over 50 locations to Cimarex's active Texas Panhandle Granite Wash drilling program.

Cimarex has also agreed to sell a portion of its non-core West Texas Spraberry oil properties for $90 million. These properties have daily production of approximately 700 barrels of oil equivalent. This sale is expected to close in December 2007.

Share Repurchases

Third-quarter 2007 repurchases totaled 916,900 shares at an average price of $37.38. Cumulative purchases under the four million share authorization total 1,364,300 shares at an average price of $39.05.

Other Items

Third-quarter 2007 production expense includes $0.7 million ($0.01 per share after-tax) related to hurricanes Rita and Katrina repair costs in excess of insurance reimbursement.

Other Operating expense for the three months ended September 30, 2007, includes $3.8 million ($0.03 per share after-tax) for litigation pertaining primarily to resolution of oil and gas property title and royalty issues.

The current quarter's other income and expense includes a $3.0 million ($0.02 per share after-tax) gain on sale of certain limited partnership interests.

Third-quarter 2006 net income included an $18.3 million ($0.14 per share after-tax) gain on sale of certain limited partnership interests and a gain on derivative instruments of $4.8 million ($0.04 per share after-tax).

Outlook

Including the impact of asset sales, timing of well-connections and net risked drilling potential, fourth-quarter 2007 production volumes are projected to average between 460-470 MMcfe/d, resulting in full-year 2007 production volumes of 448-451 MMcfe/d.

Expenses for the fourth-quarter 2007 are expected to fall within the following ranges:

Expenses ($/Mcfe): Production expense $1.30 - $1.35 Transportation expense 0.16 - 0.18 DD&A and ARO accretion 2.85 - 2.95 General and administrative expense 0.28 - 0.30 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 888-603-6873 and reference call ID # 9333148 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 # 9333148. The listen-only web cast of the call will be accessible via http://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, Permian Basin and Gulf Coast 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.

(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 For the Nine Months Ended Months Ended September 30, September 30, 2007 2006 2007 2006 Gas Production: Total production - Mcf 29,921,053 31,096,190 88,559,832 94,428,972 Gas volume - Mcf per day 325,229 338,002 324,395 345,894 Gas price - per Mcf (before hedge effect) $6.04 $6.35 $6.59 $6.60 Effect of hedges $0.39 -- $0.23 -- Gas price - per Mcf (after hedge effect) $6.43 $6.35 $6.82 $6.60 Oil Production (including NGL): Total production - barrels 1,889,376 1,679,470 5,450,911 4,818,606 Oil volume - barrels per day 20,537 18,255 19,967 17,651 Oil price - per barrel $71.63 $66.57 $62.99 $64.11 OIL AND GAS CAPITALIZED COSTS INCURRED For the Three For the Nine Months Ended Months Ended September 30, September 30, 2007 2006 2007 2006 (in thousands) (in thousands) Exploration and Development $234,188 $249,718 $716,567 $804,599 Acquisitions 41,111 566 41,134 7,710 Total oil and gas expenditures 275,299 250,284 757,701 812,309 Sale proceeds (1,825) (4,450) (22,705) (4,450) $273,474 $245,834 $734,996 $807,859 RECONCILIATION OF CASH FLOW FROM OPERATIONS For the Three For the Nine Months Ended Months Ended September 30, September 30, 2007 2006 2007 2006 (in thousands) (in thousands) Net cash provided by operating activities $259,906 $215,352 $693,169 $677,136 Increase in operating assets and liabilities (24,653) 26,329 (6,212) 27,523 Cash flow from operations $235,253 $241,681 $686,957 $704,659 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 For the Nine Months Ended Months Ended September 30, September 30, 2007 2006 2007 2006 (In thousands, except per share data) Revenues: Gas sales $192,423 $197,460 $603,650 $622,841 Oil sales 135,335 111,801 343,329 308,911 Gas gathering, processing, and net marketing 15,995 13,621 45,733 39,761 343,753 322,882 992,712 971,513 Costs and expenses: Depreciation, depletion and amortization 117,634 104,904 339,315 290,305 Asset retirement obligation 2,124 1,977 7,114 4,918 Production 55,945 42,624 151,866 128,200 Transportation 6,882 5,845 19,110 15,636 Gas gathering and processing 6,859 7,325 21,995 20,264 Taxes other than income 22,397 22,912 66,826 68,392 General and administrative 10,922 10,804 35,531 31,679 Stock compensation, net 2,800 2,265 8,068 6,329 Gain on derivative instruments - (4,782) - (23,598) Other operating, net 3,867 - 6,182 (61) 229,430 193,874 656,007 542,064 Operating income 114,323 129,008 336,705 429,449 Other (income) and expense: Interest expense net of capitalized interest of $4,990, $6,726, $14,979 and $18,555 respectively 4,284 1,388 13,757 3,446 Amortization of fair value of debt (191) (947) (1,718) (2,838) Gain on early extinguishment of debt - - (5,099) - Other, net (5,316) (20,137) (12,222) (25,515) Income before income tax expense 115,546 148,704 341,987 454,356 Income tax expense 42,390 54,747 125,496 167,382 Net income $73,156 $93,957 $216,491 $286,974 Earnings per share: Basic $0.90 $1.15 $2.64 $3.50 Diluted $0.87 $1.11 $2.56 $3.41 Weighted average shares outstanding: Basic 81,568 82,052 82,022 82,062 Diluted 84,025 84,311 84,418 84,275 CONDENSED CASH FLOW STATEMENTS (unaudited) For the Three For the Nine Months Ended Months Ended September 30, September 30, 2007 2006 2007 2006 (In thousands) Cash flows from operating activities: Net income $73,156 $93,957 $216,491 $286,974 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 117,634 104,904 339,315 290,305 Asset retirement obligation 2,124 1,977 7,114 4,918 Deferred income taxes 42,390 66,285 125,496 174,602 Stock compensation, net 2,800 2,265 8,068 6,329 Derivative instruments - (8,744) - (39,200) Gain on liquidation of equity investees (3,015) (18,322) (3,015) (18,322) Other 164 (641) (6,512) (947) Changes in operating assets and liabilities: (Increase) decrease in receivables, net 7,902 (3,978) 19,643 51,067 (Increase) decrease in other current assets 4,517 1,270 (4,451) (9,454) Increase (decrease) in accounts payable and accrued liabilities 17,607 (23,391) (1,255) (69,336) Increase (decrease) in other non-current liabilities (5,373) (230) (7,725) 200 Net cash provided by operating activities 259,906 215,352 693,169 677,136 Cash flows from investing activities: Oil and gas expenditures (262,731) (260,368) (735,937) (802,155) Acquisition of proved oil and gas properties (17,531) (789) (17,554) (5,530) Proceeds from sale of assets 1,666 5,059 23,196 10,659 Distributions received from equity investees 3,015 57,871 3,015 58,285 Other expenditures (3,601) (8,154) (10,991) (23,651) Net cash used by investing activities (279,182) (206,381) (738,271) (762,392) Cash flows from financing activities: Net increase (decrease) in bank debt 39,000 (3,000) (56,000) 50,000 Borrowings on other long-term debt - - 350,000 - Payments on other long-term debt - - (204,360) - Financing costs incurred (1) - (6,099) (74) Treasury stock acquired (36,643) - (42,266) (11,016) Dividends paid (3,348) (3,345) (10,095) (10,006) Proceeds from issuance of common stock and other 880 69 8,897 2,789 Net cash (used in) provided by financing activities (112) (6,276) 40,077 31,693 Net change in cash and cash equivalents (19,388) 2,695 (5,025) (53,563) Cash and cash equivalents at beginning of period 19,411 5,389 5,048 61,647 Cash and cash equivalents at end of period $23 $8,084 $23 $8,084 BALANCE SHEETS (unaudited) September 30, December 31, Assets 2007 2006 (In thousands, except share data) Current assets: Cash and cash equivalents $23 $5,048 Restricted cash 7,373 - Receivables, net 292,218 306,458 Inventories 36,750 39,397 Deferred income taxes 7,937 1,498 Derivative instruments 19,626 41,945 Other current assets 29,509 22,411 Total current assets 393,436 416,757 Oil and gas properties at cost, using the full cost method of accounting: Proved properties 5,393,449 4,656,854 Unproved properties and properties under development, not being amortized 423,013 425,173 5,816,462 5,082,027 Less - accumulated depreciation, depletion and amortization (1,820,727) (1,494,317) Net oil and gas properties 3,995,735 3,587,710 Fixed assets, net 86,370 88,924 Goodwill 691,432 691,432 Derivative instruments 1,928 7,051 Other assets, net 45,060 37,876 $5,213,961 $4,829,750 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $42,027 $56,241 Accrued liabilities 227,293 202,163 Revenue payable 103,029 96,184 Total current liabilities 372,349 354,588 Long-term debt 526,349 443,667 Deferred income taxes 1,045,351 921,665 Other liabilities 134,228 133,687 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, 83,567,913 and 83,962,132 shares issued, respectively 836 840 Treasury stock, at cost, 1,078,822 and 1,078,822 shares held, respectively (40,628) (40,628) Paid-in capital 1,837,812 1,867,448 Retained earnings 1,323,815 1,117,402 Accumulated other comprehensive income 13,849 31,081 3,135,684 2,976,143 $5,213,961 $4,829,750

Cimarex Energy Co.

CONTACT: Mark Burford, Director of Capital Markets of Cimarex EnergyCo., +1-303-295-3995

Web site: http://www.cimarex.com/

Source: PRNewswire-FirstCall

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