EX-99.1 2 ce3323ex991.txt Exhibit 99.1 CIMAREX ENERGY REPORTS SECOND-QUARTER FINANCIAL RESULTS DENVER, Aug. 8 /PRNewswire-FirstCall/ -- Cimarex Energy Co. (NYSE: XEC) today announced results from operations for the quarter ended June 30, 2005. As previously reported, Cimarex completed the acquisition of Magnum Hunter Resources, Inc. on June 7, 2005. Financial results for the second quarter of 2005 include results of operations from the acquired assets for 23 days. Expenses related to the merger recorded in the second quarter of 2005 totaled $6.7 million, or $4.3 million after-tax ($0.08 per share). Cimarex also recorded a loss on derivative instruments related to the commodity swaps and collars assumed in the merger of $2.0 million, or $1.3 million after-tax ($0.02 per share). Including items related to the merger, net income for the second-quarter 2005 was $52.5 million, or $0.98 per diluted share. This compares to second quarter 2004 earnings of $36.5 million, or $0.85 per diluted share. F.H. Merelli, Chairman and CEO of Cimarex, said, "We are pleased to have the Magnum Hunter merger closed. We look forward to integrating the properties and applying our drilling-focused approach to these assets." Revenues from oil and gas sales rose 60% in the second quarter of 2005 to $185.0 million, compared to $115.3 million in the same period of 2004. Second quarter 2005 cash flow from operations totaled $132.7 million, versus $84.5 million in the same period of 2004(1). For the six month period ended June 30, 2005, Cimarex reported net income of $95.8 million, or $1.98 per diluted share, up from $66.3 million, or $1.56 per diluted share, for the comparable period of 2004. Oil and gas sales for the first half of 2005 totaled $322.4 million, up from $210.8 million during the corresponding period of 2004. Cash flow from operations for the first six months of 2005 increased to $233.3 million from $152.3 million during the first half of 2004(1). The increases in oil and gas revenues, earnings and cash flow are due to higher oil and natural gas prices and record production volumes. The increase in production is attributable to the addition of Magnum Hunter operations during the second quarter and continued positive drilling results. (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. Production Volumes Total daily production volumes averaged 295 million cubic feet (MMcf) equivalent during the second quarter of 2005 versus 220 MMcf equivalent a year earlier. Cimarex's reported results include Magnum Hunter's production for the period after the June 7, 2005 merger, or 23 days of the second quarter. Magnum Hunter production averaged 243.7 MMcfe per day in June, which added 5.6 Bcfe to Cimarex's second quarter 2005 volumes. The following table summarizes production volumes for Cimarex and Magnum Hunter:

Magnum Hunter Cimarex Q2 Volumes ------------------------------------ ------------------------------------ June 23 Days Stand MHR Total Q2 2005 2005 of June -alone 23 Days Cimarex ---------- ---------- ---------- ---------- ---------- ---------- Production: Natural Gas (Bcf) 15.9 5.1 3.9 17.2 3.9 21.1 Oil and NGL (Mbbls) 1,122.6 363.2 278.5 668.1 278.5 946.6 Equivalent (Bcfe) 22.6 7.3 5.6 21.2 5.6 26.8 Avg. Daily Production: No. of Days 91 30 23 91 91 91 Natural Gas (MMcf/d) 174.6 171.1 171.1 189.1 43.2 232.3 Oil and NGL (Mbbl/d) 12.3 12.1 12.1 7.3 3.1 10.4 Equivalent (MMcfe/d) 248.6 243.7 243.7 233.2 61.5 294.7

The oil and natural gas swaps and collars assumed as part of the Magnum Hunter acquisition are not considered effective hedges under SFAS 133. The mark-to-market value of the derivative instruments is included in losses on derivative instruments in the income statement. For the second quarter of 2005 Cimarex recorded a loss on derivative instruments of $2.0 million, or $1.3 million after-tax ($0.02 per share). Second-quarter 2005 costs and expenses directly associated with exploration and production activities totaled $86.8 million versus $52.5 million during the second quarter of 2004. The increase in cost and expense is primarily a result of the Magnum Hunter acquisition. The largest components of the increase are a $20.7 million rise in depreciation, depletion and amortization, and $8.0 million increase in production expense. Production taxes also grew by $4.1 million due to higher revenues. Exploration and development (E&D) expenditures during the second quarter of 2005 totaled $141.0 million, up from $81.6 million for the second quarter 2004. Included in second-quarter 2005 expenditures is $32.7 million incurred on Magnum Hunter properties during June. In the second quarter of 2005, we participated in drilling 121 gross wells, with an overall success rate of 93%. On a net basis, 53 of 60 wells drilled during the second quarter were successful. E&D capital expenditures for the first six months of 2005 were $233.7 million, up from $150.2 million during the first half of 2004. We drilled 180 gross (96 net) wells during the first six months of 2005, realizing a success rate of 89%. Including costs incurred by Magnum Hunter prior to the merger, first-half 2005 E&D expenditures incurred by both companies totaled $375 million. Outlook For the second half of 2005, Cimarex's E&D expenditures are projected to total approximately $325 million. Together with first-half spending by Cimarex and Magnum Hunter, total combined 2005 E&D expenditures would equate to approximately $700 million. Based upon anticipated capital spending and numerous other factors related to production volume forecasts, Cimarex's second-half 2005 aggregate production is expected to range from 475 to 490 MMcfe per day (77% natural gas). Certain operating expenses for the remainder of 2005 are expected to fall within the following ranges summarized below based upon estimated production. Operating Expenses ($/Mcfe): Production expense $0.75 - $0.80 Transportation expense 0.12 - 0.15 Depreciation, depletion and amortization 2.10 - 2.20 General and administrative expense 0.27 - 0.30 Production taxes (% of oil and gas revenue) 7.0% - 7.5% Conference call and web cast A conference call with management has been scheduled for 11 a.m. Mountain Time (1 p.m. Eastern), Monday August 8, 2005. Interested parties may access the call by dialing (800) 938-0653 and requesting the Cimarex Energy Co. teleconference. In addition, a listen-only web cast of the call will be provided at www.cimarex.com. Please go to the website at least ten minutes early to register and to download any necessary audio software. 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. Risks, uncertainties and assumptions include 1) the possibility that problems may arise in successfully integrating the Magnum Hunter acquisition; 2) the possibility that the acquisition may involve unexpected costs; 3) the possibility that the industry may be subject to future regulatory or legislative actions; 4) the volatility in commodity prices for oil and gas; 5) the presence or recoverability of estimated reserves; 6) the ability to replace reserves; 7) environmental risks; 8) drilling and operating risks; 9) exploration and development risks; 10) competition; 11) the ability of management to execute its plans to meet its goals and other risks that are described in SEC reports filed by Cimarex. Because forward-looking statements involve risks and uncertainties, actual results and events may differ materially from results and events currently expected by Cimarex. Cimarex assume no obligation and expressly disclaim any duty to update the information contained herein except as required by law. PRICE AND PRODUCTION DATA

For the Three Months Ended For the Six Months Ended June 30 June 30 --------------------------- --------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ Gas Production: Total production - Mcf 21,142,547 16,096,010 38,778,944 30,226,135 Gas volume - Mcf per day 232,336 176,879 214,248 166,078 Gas price - per Mcf $ 6.49 $ 5.65 $ 6.27 $ 5.47 Oil Production (including NGL): Total production - barrels 946,584 653,758 1,612,938 1,280,375 Oil volume - barrels per day 10,402 7,184 8,911 7,035 Oil price - per barrel $ 50.56 $ 37.40 $ 49.21 $ 35.64

CAPITALIZED COSTS INCURRED

For the Three Months Ended For the Six Months Ended June 30 June 30 --------------------------- --------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (in thousands) (in thousands) Exploration and development $ 140,971 $ 81,630 $ 233,708 $ 150,249 Acquisition of Magnum Hunter 1,834,680 -- 1,834,680 -- Acquisitions of other proved properties 1,705 (7) 1,948 2 Oil and gas expenditures 1,977,356 81,623 2,070,336 150,251 Sale Proceeds (333) (329) (347) (364) $ 1,977,023 $ 81,294 $ 2,069,989 $ 149,887

RECONCILIATION OF CASH FLOW FROM OPERATIONS

For the Three Months Ended For the Six Months Ended June 30 June 30 --------------------------- --------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (in thousands) (in thousands) Net cash provided by operating activities $ 103,229 $ 81,350 $ 199,206 $ 142,821 Increase in operating assets and liabilities 29,511 3,120 34,152 9,525 Cash flow from operations $ 132,740 $ 84,470 $ 233,358 $ 152,346

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 Six Months Ended June 30 June 30 ---------------------------- ---------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (In thousands, except per share data) Revenues: Gas sales $ 137,159 $ 90,864 $ 243,033 $ 165,196 Oil sales 47,862 24,450 79,370 45,628 Gas gathering, marketing, and processing 65,215 53,831 118,951 90,592 Other, net 2,222 1,048 2,811 4,696 252,458 170,193 444,165 306,112 Costs and expenses: Depreciation, depletion and amortization 51,582 30,834 89,667 57,172 Asset retirement obligation accretion 550 304 935 594 Transportation 3,608 2,493 6,082 4,848 Production 17,412 9,419 27,583 18,888 Taxes other than income 13,600 9,464 24,495 17,829 Gas gathering, marketing, and processing 63,987 53,286 117,214 89,586 General and administrative 7,657 5,133 15,549 9,642 Stock compensation 1,213 484 2,438 952 Expenses related to merger 6,685 -- 6,685 -- Loss on derivative instruments 2,030 -- 2,030 -- 168,324 111,417 292,678 199,511 Operating income 84,134 58,776 151,487 106,601 Other income and expense: Interest expense 3,771 280 3,959 576 Amortization of fair value of debt (416) -- (416) -- Capitalized interest (1,179) -- (1,179) -- Interest income and other (693) (102) (1,345) (189) Income before income tax expense 82,651 58,598 150,468 106,214 Income tax expense 30,174 22,128 54,626 39,879 Net income $ 52,477 $ 36,470 $ 95,842 $ 66,335 Earnings per share: Basic $ 1.01 $ 0.88 $ 2.04 $ 1.60 Diluted $ 0.98 $ 0.85 $ 1.98 $ 1.56 Weighted average shares outstanding: Basic 51,967 41,379 46,886 41,342 Diluted 53,655 42,704 48,427 42,657

CASH FLOW STATEMENTS (unaudited)

For the Three Months Ended For the Six Months Ended June 30 June 30 --------------------------- --------------------------- 2005 2004 2005 2004 ------------ ------------ ------------ ------------ (In thousands) Cash flows from operating activities: Net income $ 52,477 $ 36,470 $ 95,842 $ 66,335 Adjustment to reconcile net income to net cash provided by operating activities: Depreciation, depletion and amortization 51,582 30,834 89,667 57,172 Asset retirement obligation accretion 550 304 935 594 Deferred income taxes 18,807 16,375 36,119 27,299 Stock compensation 1,213 484 2,438 952 Other 8,111 3 8,357 (6) Changes in operating assets and liabilities, net of effects of the acquisition of Magnum Hunter: (Increase) decrease in receivables, net 9,470 (8,625) 17,341 (22,060) (Increase) in other current assets (4,548) (3,595) (11,962) (4,435) Increase (decrease) in accounts payable and accrued liabilities (34,117) 8,969 (39,132) 16,812 Increase (decrease) in other non-current liabilities (316) 131 (399) 158 Net cash provided by operating activities 103,229 81,350 199,206 142,821 Cash flows from investing activities: Oil and gas expenditures (107,955) (60,923) (204,428) (128,299) Acquisition of oil and gas properties (1,705) 7 (1,948) (2) Merger related costs (11,134) -- (11,134) -- Cash received in connection with acquisition of MHR 33,407 -- 33,407 -- Proceeds from sale of assets 368 339 405 452 Other expenditures (14,269) (1,434) (17,362) (3,386) Net cash used by investing activities (101,288) (62,011) (201,060) (131,235) Cash flows from financing activities: Borrowings (payments) on long-term debt, net (60,064) -- (60,064) -- Financing costs (1,370) -- (1,370) -- Common stock reacquired and retired (2,063) -- (2,130) (121) Proceeds from issuance of common stock 5,836 249 6,977 6,196 Net cash (used in) provided by financing activities (57,661) 249 (56,587) 6,075 Net change in cash and cash equivalents (55,720) 19,588 (58,441) 17,661 Cash and cash equivalents at beginning of period 113,025 38,493 115,746 40,420 Cash and cash equivalents at end of period $ 57,305 $ 58,081 $ 57,305 $ 58,081

BALANCE SHEETS (unaudited)

June 30 December 31 2005 2004 --------------- --------------- (In thousands, except share data) Assets Current assets: Cash and cash equivalents $ 57,305 $ 115,746 Receivables, net 208,042 103,989 Inventories 24,290 9,742 Deferred income taxes 23,183 2,149 Assets available for sale 8,434 -- Other current assets 21,223 4,821 Total current assets 342,477 236,447 Oil and gas properties at cost, using the full cost method of accounting: Proved properties 3,353,518 1,596,704 Unproved properties and properties under development, not being amortized 387,523 72,249 3,741,041 1,668,953 Less -- accumulated depreciation, depletion and amortization (957,034) (866,660) Net oil and gas properties 2,784,007 802,293 Fixed assets, net 87,947 16,109 Goodwill 730,399 44,967 Other assets, net 52,830 5,630 $ 3,997,660 $ 1,105,446 Liabilities and Stockholders' Equity Current liabilities: Current maturities of long-term debt $ 758 $ -- Accounts payable 39,510 26,511 Accrued liabilities 171,962 77,362 Derivative fair value 30,742 -- Revenue payable 73,280 39,129 Total current liabilities 316,252 143,002 Long-term debt 572,489 -- Deferred income taxes 643,673 225,285 Other liabilities 161,640 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, 84,552,041 and 41,729,280 shares issued, respectively 846 417 Treasury stock, at cost, 2,475,725 shares held (93,236) -- Paid-in capital 1,858,256 250,248 Unearned compensation (18,187) (10,072) Retained earnings 555,873 460,031 Accumulated other comprehensive income 54 88 2,303,606 700,712 $ 3,997,660 $ 1,105,446

SOURCE Cimarex Energy Co. -0- 08/08/2005 /CONTACT: Mark Burford, Director of Capital Markets of Cimarex Energy Co., +1-303-295-3995/ /Web site: http://www.cimarex.com /