Cimarex Announces Fourth-Quarter Production Volumes, Year-End Proved Reserves and 2010 Guidance; Provides Operations Update
08 February 2010 - 10:00PM
PR Newswire (US)
DENVER, Feb. 8 /PRNewswire-FirstCall/ -- Cimarex Energy Co.
(NYSE:XEC) today announced fourth-quarter oil and gas production
volumes averaged 467.6 million cubic feet equivalent per day
(MMcfe/d). Average daily equivalent production was comprised of
330.0 million cubic feet of gas and 22,935 barrels of oil.
Fourth-quarter 2009 production grew 6% sequentially from the
third-quarter 2009 average of 441.5 MMcfe/d but fell 5% as compared
to the fourth-quarter 2008 average of 493.7 MMcfe/d. Production
rate fluctuations reflect the reduction and then increase in
operated drilling rigs and successful Gulf Coast exploration.
Cimarex's fourth-quarter 2008 operated rig count averaged 31, then
was reduced to three rigs in the first quarter of 2009 and averaged
12 by the fourth quarter of 2009. Fourth-quarter 2009 realized
prices are expected to be in the range of $5.25 to $5.35 per
thousand cubic feet of gas and $72.00 to $72.50 per barrel of oil.
Full-year 2009 production volumes averaged 462.9 MMcfe/d, a 4%
decrease versus 2008 adjusted for property sales. Average daily
equivalent production for 2009 was comprised of 323.2 million cubic
feet of gas and 23,283 barrels of oil. Cimarex will release its
fourth-quarter 2009 financial results on Wednesday, February 17,
2010, before the market opens. Proved Reserves Year-end 2009 proved
reserves grew 15% to 1.53 trillion cubic feet equivalent (Tcfe)
from 1.34 Tcfe at year-end 2008. Proved reserves are 77% developed
at year-end 2009 as compared to 82% at year-end 2008. Reserves
added from extensions, discoveries & improved recoveries
totaled 312 billion cubic feet equivalent (Bcfe), replacing 185% of
production. Proved reserves of 25 Bcfe were sold in 2009. Revisions
to previous estimates added 73.9 Bcfe, comprised of 104.7 Bcfe from
positive performance and reductions in operating costs, offset by
30.8 Bcfe from lower prices. Proved reserves at year-end 2009
include 225.2 Bcfe in the western Oklahoma, Cana-Woodford shale
play, comprised of 110.9 Bcfe of proved developed and 114.3 Bcfe of
proven undeveloped reserves. The following table reflects the 2009
activity related to Cimarex's proved reserves: December 31, 2009
------------------------------- Gas Oil Total ------- ------
------- (Bcf) (MBbl) (Bcfe) Total proved reserves Beginning of year
1,067.3 45,202 1,338.5 Revisions of previous estimates 6.7 11,201
73.9 Extensions, discoveries & improved recoveries 229.7 13,770
312.3 Purchase of reserves 2.1 300 3.9 Production (118.0) (8,498)
(169.0) Sales of properties (1.2) (3,958) (24.9) ------- ------
------- End of year 1,186.6 58,017 1,534.7 Proved developed
reserves, year-end 2009 865.7 53,889 1,189.0 2009 2008 % Chg.
------ ------ ------ Pre-tax PV-10 ($in millions) (1) $2,285.9
$2,327.9 -2% Standardized Measure ($in millions) $1,668.0 $1,724.3
-3% Average prices used in Standardized Measure (2) Gas price per
Mcf $3.56 $5.33 -33% Oil price per barrel $57.58 $36.34 58% The
following table summarizes our estimated proved oil and gas
reserves by region as of December 31, 2009. Percent of Oil Gas
Equivalent Proved (MBbl) (Bcf) (Bcfe) Reserves ------ -----
---------- ---------- Mid-Continent 10,869 665.2 730.4 47% Permian
Basin 41,938 235.7 487.3 32% Gulf Coast 5,170 75.0 106.0 7%
Wyoming/Other 40 210.7 211.0 14% ------ ------- ------- ---- 58,017
1,186.6 1,534.7 100% ====== ======= ======= ==== Oil and Gas
Capital Investment The following table sets forth the capitalized
costs incurred in our oil and gas production, exploration, and
development activities (in thousands): Years Ended December 31,
------------------------ 2009 2008 ---- ---- Acquisition: Proved
$13,530 $6,618 Unproved* (9,915) 175,777 ------ ------- 3,615
182,395 Exploration and development: Land and seismic 48,466
157,403 Exploration and development 475,960 1,280,980 -------
--------- 524,426 1,438,383 Sales proceeds (109,408) (38,093)
$418,633 $1,582,685 ======== ========== * The negative balance
reflects purchase price adjustments related to an acreage
acquisition in the fourth quarter of 2008. 2010 Guidance
First-quarter 2010 production is projected to range between 515-530
MMcfe/d. Full-year 2010 production is projected to be in the range
of 520-540 MMcfe/d, or a 12-17% increase over 2009. Full-year 2010
exploration and development (E&D) capital investment is
targeted to be generally within cash flow. At the present time,
based on current market prices and service costs, we would expect
that 2010 capital expenditures may range from $700-$900 million. We
have a large inventory of drilling opportunities and limited lease
expirations. An approximate break down of the mid-point of our
potential 2010 E&D capital investment and actual 2009 by region
is provided below. ($in millions) 2010 E&D Estimate 2009
E&D ----------------- ------------- Mid-Continent $410 52% $251
48% Permian 250 31% 155 30% Gulf Coast/GOM 130 16% 106 20%
Western/Other 10 1% 12 2% ---- --- ---- --- $800 100% $524 100%
Bank-Credit Facility At year-end 2009, Cimarex had $25.0 million in
borrowings outstanding on its revolving credit facility. Bank
borrowings decreased $195 million from the year-end 2008 balance of
$220 million. The reduction was funded from non-core property
sales, tax refunds, lower capital spending relative to cash flow
and a net positive working capital change. The revolving credit
facility has commitments totaling $800 million and a borrowing base
of $1.0 billion. Exploration and Development Activity Cimarex
drilled and completed 110 gross (67 net) wells during 2009,
completing 93% as producers. At year-end 11 gross (6.3 net)
Cana-Woodford wells were waiting on completion. Cimarex's reduced
operated rig count resulted in drilling 73% fewer wells in 2009 as
compared to 2008. Exploration and development (E&D) capital
investment for 2009 totaled $524 million versus 2008 investment of
$1.4 billion. Currently, 14 operated rigs are drilling; six in
Oklahoma, one in the Texas Panhandle, four in the Permian Basin and
three in the Gulf Coast. Mid-Continent Cimarex drilled and
completed 51 gross (22 net) wells during the twelve months ending
December 31, 2009, completing 98% as producers. Mid-Continent
capital investment of $251 million accounted for 48% of total
E&D capital. Fourth-quarter 2009 Mid-Continent production
averaged 205.7 MMcfe/d, versus a fourth-quarter 2008 average of
237.6 MMcfe/d The majority of the activity occurred in the Anadarko
Basin, Cana-Woodford shale play, where Cimarex drilled 46 gross
(19.9 net) wells in 2009, of which at year-end 11 gross (6.3 net)
wells were waiting on completion. Since the Cana play began in late
2007, Cimarex has participated in 75 gross (32.8 net) wells. Of
total wells, 58 gross (23.7 net) were on production at year-end and
the remainder were either in the process of being drilled or
awaiting completion. Our year-end net production rate from the
completed wells was 46 MMcfe/d. Fourth-quarter 2009 net production
from the Cana play averaged 33 MMcfe/d versus the fourth-quarter
2008 production of 20 MMcfe/d. For the 58 producing wells, average
estimated gross ultimate recovery exceeds 6.5 Bcfe per well. During
2009, the company's horizontal Cana wells had an average completed
well cost of $7.9 million, horizontal lateral length of 4,500 feet
and time to drill to total depth of less than 60 days. Cimarex
currently has seven operated rigs running in the Mid-Continent; six
in the Cana play and one in the Texas Panhandle. Permian Basin
Permian Basin drilling for 2009 totaled 49 gross (36.3 net) wells,
90% of which were completed as producers. Full-year 2009 capital
investment in this area totaled $155 million, or 30% of total
E&D capital. Fourth-quarter 2009 Permian Basin production
averaged 144.2 MMcfe/d, as compared to 176.3 MMcfe/d during the
fourth quarter of 2008. Southeast New Mexico drilling, mainly
targeting the Abo, Bone Spring, Cherry Canyon, Paddock and Wolfcamp
formations, totaled 38 gross (30 net) wells with 87% being
completed as producers. Recent Abo wells brought on production
include the Midway 17 Federal 3H (100% working interest) at 490
barrels per day and the Midway 17 Federal 2H (100% working
interest) at 310 barrels per day (first 30-day gross average).
Other notable 30-day average rates from 2009 Bone Spring horizontal
oil wells include the Shugart West 31 Fed 3H (79% working interest)
at 560 barrels per day and State 14 Com 2H (100% working interest)
at 325 barrels per day. Gulf Coast/Gulf of Mexico Cimarex drilled
nine gross (8.1 net) Gulf Coast wells in 2009, completing eight as
producers. Gulf Coast capital investment of $106 million accounted
for 20% of total E&D expenditures. Fourth-quarter 2009 Gulf
Coast production volumes averaged 107.2 MMcfe/d, a 57% increase
over the fourth-quarter 2008 average of 68.4 MMcfe/d. Offshore
production volumes averaged 9.0 MMcfe/d, as compared to 7.3 MMcfe/d
in the fourth quarter of 2008. In 2009, Southeast Texas Yegua/Cook
Mountain drilling totaled seven gross (6.9 net) wells, with six
being completed as producers. Cimarex's Gulf Coast drilling has
primarily been near Beaumont in Jefferson County, Texas. The Two
Sisters #1, the first of four 2009 discoveries in this area,
commenced production in early July 2009 at approximately 40 MMcfe/d
gross, and has continued at that rate through year-end. In October
2009, the Garth #1 was brought online at 32 MMcfe/d. Two more
wells, the Jefferson Airplane #2 and the Jefferson Airplane #3,
each began producing in November and December at 42 MMcfe/d.
Year-end 2009 ---------------------------- Net Working Revenue
Gross Gross Oil/ Gross First Prod. Interest Interest Gas Condensate
Equivalent Well Name Month % % (MMcf/d) (Barrels/d) (MMcfe/d)
--------- ----------- -------- ------- -------- -----------
--------- Two Sisters #1 July 2009 100% 75% 25 2,500 40 Garth #1
Oct. 2009 100% 68% 23 1,400 31 Jefferson Airplane #2 Nov. 2009 96%
72% 32 1,600 42 Jefferson Airplane #3 Dec. 2009 96% 72% 31 1,800 42
---- ----- ---- Average 28 1,825 39 Two operated rigs are currently
drilling in the Southeast Texas Yegua/Cook Mountain play near
Beaumont. Cimarex will release fourth-quarter 2009 financial
results before the market opens on Wednesday, February 17, 2010.
Cimarex will also host a conference call that day at 11:00 a.m.
Mountain Time (1:00 p.m. Eastern Time). To access the live,
interactive call, please dial (800) 921-0061 and reference call ID
# 52139473 ten minutes before the scheduled start time. A digital
replay will be available for one week following the live broadcast
at (800) 642-1687 and by using the conference ID # 52139473. 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) Pre-tax PV-10% is a financial
measure that is not calculated in accordance with generally
accepted accounting principles, or GAAP, as defined by the SEC.
Pre-tax PV-10% is comparable to the standardized measure, which is
the most directly comparable GAAP financial measure. Pre-tax PV-10%
is computed on the same basis as the standardized measure but
without deducting future income taxes. As of December 31, 2009 and
2008, Cimarex's discounted future income taxes were $617.9 million
and $603.6 million, respectively. Cimarex's standardized measure of
discounted future net cash flows was $1,668 million at year-end
2009 and $1,724.3 million at year-end 2008. Cimarex believes
pre-tax PV-10% is a useful measure for investors for evaluating the
relative monetary significance of its oil and natural gas
properties. Cimarex further believes investors may utilize its
pre-tax PV-10% as a basis for comparison of the relative size and
value of its reserves to other companies because many factors that
are unique to each individual company impact the amount of future
income taxes to be paid. However, pre-tax PV-10% is not a
substitute for the standardized measure of discounted future net
cash flows. Cimarex's pre-tax PV-10% and the standardized measure
of discounted future net cash flows do not purport to present the
fair value of its oil and natural gas reserves. (2) SEC's rules for
booking proved reserves changed for 2009, the impact to Cimarex was
minimal, beyond the change to a new standard using 12-month average
pricing. Year end 2009 reserve estimates are based on first day
12-month average prices of $3.87 per MMBtu of natural gas (Henry
Hub) and $61.18 per barrel of oil (WTI). DATASOURCE: Cimarex Energy
Co. CONTACT: Mark Burford, Director of Capital Markets of Cimarex
Energy Co., +1-303-295-3995, Web Site: http://www.cimarex.com/
Copyright