EX-99.1 2 a20190930xecpressrelea.htm EXHIBIT 99.1 Exhibit
 
 
N E W S
Cimarex Energy Co.
1700 Lincoln Street, Suite 3700
Denver, CO 80203 
Phone: (303) 295-3995
 
cimarexa06.jpg


Cimarex Reports Third Quarter 2019 Results
•
Oil production averaged 89.7 MBbls/d; up 8% sequentially
•
2019 Exploration & Development capital guidance range lowered to $1.3 - 1.4 billion
•
Reduced per unit production expense 12% year-over-year

DENVER, November 4, 2019 - Cimarex Energy Co. (NYSE: XEC) today reported third quarter 2019 net income of $40.5 million, or $0.39 per share, compared to $148.4 million, or $1.56 per share, in the same period a year ago. Third quarter 2019 results were negatively impacted by a non-cash charge related to the impairment of oil and gas properties. Third quarter adjusted net income (non-GAAP) was $92.9 million, or $0.91 per share, compared to third quarter 2018 adjusted net income (non-GAAP) of $189.6 million, or $1.99 per share1. Net cash provided by operating activities was $320.1 million in the third quarter of 2019 compared to $453.5 million in the same period a year ago. Adjusted cash flow from operations (non-GAAP) was $360.7 million in the third quarter of 2019 compared to $388.7 million in the third quarter a year ago1.

Oil production averaged 89.7 thousand barrels (MBbls) per day, up 40 percent from the same period a year ago and up eight percent sequentially. Total company production volumes for the quarter averaged 287.1 thousand barrels of oil equivalent (MBOE) per day.

Realized product prices were down in the third quarter compared to the same quarter a year ago. Realized oil prices averaged $52.71 per barrel, down 10 percent from the $58.25 per barrel received in the third quarter of 2018. Realized natural gas prices averaged $0.88 per thousand cubic feet (Mcf), down 52 percent from the third quarter 2018 average of $1.84 per Mcf but up 76 percent sequentially. NGL prices averaged $10.80 per barrel, down 58 percent from the $25.72 per barrel received in the third quarter of 2018. See footnotes to the Average Realized Prices by Region table below for ASC 606 impact on realized prices.

Natural gas prices were negatively impacted by local price differentials. Cimarex's average differential to Henry Hub on its Permian natural gas production was $1.83 per Mcf in the third quarter of 2019 compared to $1.25 per Mcf in the third quarter of 2018 and $3.10 in the second quarter of 2019. In the Mid-Continent region, the company's average differential to Henry Hub was $0.66 per Mcf versus $0.94 per Mcf in the third quarter of 2018 and $0.86 in the second quarter of 2019. Our realized Permian oil differential to WTI Cushing improved and averaged $3.76 per barrel in the quarter, compared to $14.34 per barrel in the third quarter of 2018 and $5.80 per barrel in the second quarter of 2019.


1


Production expense averaged $3.34 per BOE for the third quarter, down 12 percent compared to the same period a year ago and down five percent sequentially.

Cimarex invested $296 million in exploration and development (E&D) during the third quarter, of which $221 million is attributable to drilling and completion activities. Cimarex invested $19 million in midstream assets during the quarter. Third quarter investments were funded with cash flow from operating activities. Total debt at September 30, 2019 consisted of $2.0 billion of long-term notes. Cimarex had no borrowings under its revolving credit facility and a cash balance of $24 million. Debt was 35 percent of total capitalization2.

Outlook
Fourth quarter 2019 production volumes are expected to average 272 - 292 MBOE per day. Oil volumes are estimated to average 86.0 - 92.0 MBbls per day in the fourth quarter, essentially flat sequentially at the midpoint, with Permian growth expected to outpace total company growth. Total 2019 daily annual oil volumes are estimated to average 84.5 - 86.5 MBbls per day with total production volumes expected to average 274 - 278 MBOE per day, up three percent at the midpoint from previous guidance due primarily to higher than expected NGL recoveries.

Estimated 2019 exploration and development investment is $1.30 – 1.40 billion, down four percent at the midpoint from guidance given in February. Midstream investments are estimated to total approximately $70 million in 2019.

Expenses per BOE of production for 2019 are estimated to be:

 
 
Production expense
$3.30 - 3.55
 
Transportation, processing and other expense
1.80 - 2.20
 
DD&A and ARO accretion
7.75 - 8.75
 
General and administrative expense
0.95 - 1.10
 
Taxes other than income (% of oil and gas revenue)
  6.0 - 7.0%

Cimarex Chairman and CEO, Tom Jorden, said, "We have seen strong execution in 2019, which we expect to continue into 2020. Our initial planning indicates that we will generate meaningful free cash flow in 2020 using a flat $50 per barrel WTI price and NYMEX gas price of $2.50 per Mcf, adjusted for basis differentials."

Operations Update
Cimarex invested $296 million in E&D during the third quarter, 84 percent in the Permian Basin and 16 percent in the Mid-Continent. Cimarex brought 96 gross (21 net) wells on production during the quarter. At September 30, 79 gross (34 net) wells were waiting on completion. Cimarex currently is operating eight drilling rigs.

2




WELLS BROUGHT ON PRODUCTION BY REGION
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Gross wells
 
 
 
 
 
 
 
 
Permian Basin
 
44

 
33

 
100

 
82

Mid-Continent
 
52

 
82

 
144

 
176

 
 
96

 
115

 
244

 
258

Net wells
 
 
 
 
 
 
 
 
Permian Basin
 
16

 
24

 
53

 
46

Mid-Continent
 
5

 
20

 
16

 
36

 
 
21

 
44

 
69

 
82


Permian Region
Production from the Permian region averaged 198.6 MBOE per day in the third quarter, a 64 percent increase from third quarter 2018. Oil volumes averaged 74.8 MBbls per day, a 53 percent increase from third quarter 2018 and up six percent sequentially.

Cimarex brought 44 gross (16 net) wells on production in the Permian region during the third quarter. There were 43 gross (32 net) wells waiting on completion at September 30. Cimarex currently is operating eight drilling rigs and two completion crews in the region.

Mid-Continent Region
Production from the Mid-Continent averaged 88.1 MBOE per day for the third quarter, down 10 percent from third quarter 2018 and up three percent sequentially.

During the third quarter, Cimarex brought 52 gross (5 net) wells on production in the Mid-Continent region. At the end of the quarter, 36 gross (2 net) wells were waiting on completion. Cimarex is not currently operating a drilling rig or completion crew in the Mid-Continent.



3


Cimarex’s average daily production and commodity price by region is summarized below:

DAILY PRODUCTION BY REGION
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Permian Basin
 
 
 
 
 
 
 
 
Gas (MMcf)
 
422.9

 
239.4

 
381.2

 
239.3

Oil (Bbls)
 
74,819

 
49,001

 
70,188

 
49,211

NGL (Bbls)
 
53,311

 
31,919

 
51,492

 
29,863

Total Equivalent (MBOE)
 
198.6

 
120.8

 
185.2

 
119.0

 
 
 
 
 
 
 
 
 
Mid-Continent
 
 
 
 
 
 
 
 
Gas (MMcf)
 
293.7

 
317.9

 
292.1

 
303.6

Oil (Bbls)
 
14,788

 
14,755

 
13,880

 
14,149

NGL (Bbls)
 
24,338

 
29,603

 
25,480

 
27,829

Total Equivalent (MBOE)
 
88.1

 
97.3

 
88.0

 
92.6

 
 
 
 
 
 
 
 
 
Total Company
 
 
 
 
 
 
 
 
Gas (MMcf)
 
718.0

 
558.8

 
674.6

 
544.4

Oil (Bbls)
 
89,731

 
63,909

 
84,230

 
63,586

NGL (Bbls)
 
77,693

 
61,560

 
77,021

 
57,748

Total Equivalent (MBOE)
 
287.1

 
218.6

 
273.7

 
212.1


4



AVERAGE REALIZED PRICE BY REGION
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
 
 
 
 
 
 
 
Permian Basin
 
 
 
 
 
 
 
 
Gas ($ per Mcf) (1)
 
0.40

 
1.66

 
0.36

 
1.79

Oil ($ per Bbl)
 
52.69

 
55.16

 
51.70

 
58.24

NGL ($ per Bbl) (2)
 
9.94

 
27.53

 
12.40

 
23.95

 
 
 
 
 
 
 
 
 
Mid-Continent
 
 
 
 
 
 
 
 
Gas ($ per Mcf) (3)
 
1.57

 
1.97

 
2.01

 
2.01

Oil ($ per Bbl)
 
52.73

 
68.42

 
53.55

 
64.82

NGL ($ per Bbl) (4)
 
12.69

 
23.75

 
15.28

 
21.77

 
 
 
 
 
 
 
 
 
Total Company
 
 
 
 
 
 
 
 
Gas ($ per Mcf) (5)
 
0.88

 
1.84

 
1.08

 
1.92

Oil ($ per Bbl)
 
52.71

 
58.25

 
52.02

 
59.70

NGL ($ per Bbl) (6)
 
10.80

 
25.72

 
13.36

 
22.90

________________________________________
(1)
The average realized gas price shown in the table above includes the effects of ASC 606, which reduced the average realized prices by $0.41 per Mcf, $0.12 per Mcf, $0.37 per Mcf, and $0.11 per Mcf for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2019 and 2018, respectively.

(2)
The average realized NGL price shown in the table above includes the effects of ASC 606, which reduced the average realized prices by $1.88 per barrel, $1.55 per barrel, $1.82 per barrel, and $1.64 per barrel for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2019 and 2018, respectively.

(3)
The average realized gas price shown in the table above includes the effects of ASC 606, which reduced the average realized prices by $0.04 per Mcf, $0.04 per Mcf, $0.05 per Mcf, and $0.04 per Mcf for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2019 and 2018, respectively.

(4)
The average realized NGL price shown in the table above includes the effects of ASC 606, which reduced the average realized prices by $0.29 per barrel, $0.53 per barrel, $0.31 per barrel, and $1.05 per barrel for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2019 and 2018, respectively.

(5)
The average realized gas price shown in the table above includes the effects of ASC 606, which reduced the average realized prices by $0.26 per Mcf, $0.07 per Mcf, $0.23 per Mcf, and $0.07 per Mcf for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2019 and 2018, respectively.

(6)
The average realized NGL price shown in the table above includes the effects of ASC 606, which reduced the average realized prices by $1.38 per barrel, $1.06 per barrel, $1.31 per barrel, and $1.36 per barrel for the three months ended September 30, 2019 and 2018 and the nine months ended September 30, 2019 and 2018, respectively.

5


Other
Cimarex received cash settlements of $17.6 million related to its gas hedges during the quarter. Settlement of oil hedges resulted in a cash payment of $15.9 million.

The following table summarizes the company’s current open hedge positions:

 
 
4Q19
 
1Q20
 
2Q20
 
3Q20
 
4Q20
 
1Q21
 
 
 
 
 
 
 
 
 
 
 
 
 
Gas Collars:
PEPL(3)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (MMBtu/d)
120,000

 
90,000

 
60,000

 
30,000

 
30,000

 
10,111

 
Wtd Avg Floor
$
1.92

 
$
1.92

 
$
1.90

 
$
1.85

 
$
1.85

 
$
1.85

 
Wtd Avg Ceiling
$
2.35

 
$
2.36

 
$
2.28

 
$
2.31

 
$
2.31

 
$
2.31

 
 
 
 
 
 
 
 
 
 
 
 
 
 
El Paso Perm(3)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (MMBtu/d)
60,000

 
40,000

 
30,000

 
20,000

 
20,000

 
—

 
Wtd Avg Floor
$
1.38

 
$
1.40

 
$
1.40

 
$
1.35

 
$
1.35

 
$
—

 
Wtd Avg Ceiling
$
1.71

 
$
1.79

 
$
1.82

 
$
1.66

 
$
1.66

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
 
Waha (3)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (MMBtu/d)
60,000

 
50,000

 
30,000

 
—

 
—

 
—

 
Wtd Avg Floor
$
1.48

 
$
1.50

 
$
1.57

 
$
—

 
$
—

 
$
—

 
Wtd Avg Ceiling
$
1.82

 
$
1.87

 
$
1.97

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Oil Collars:
WTI(4)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl/d)
37,326

 
30,000

 
22,000

 
14,000

 
14,000

 
6,000

 
Wtd Avg Floor
$
54.05

 
$
53.12

 
$
50.61

 
$
49.68

 
$
49.68

 
$
49.24

 
Wtd Avg Ceiling
$
66.48

 
$
65.80

 
$
62.15

 
$
60.92

 
$
60.92

 
$
58.41

 
 
 
 
 
 
 
 
 
 
 
 
 
Oil Basis Swaps:
WTI Midland(5)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl/d)
40,826

 
29,000

 
21,000

 
14,000

 
14,000

 
6,000

 
Wtd Avg Differential
$
(5.42
)
 
$
0.25

 
$
0.29

 
$
0.65

 
$
0.65

 
$
0.57

 
 
 
 
 
 
 
 
 
 
 
 
 
Oil Swaps:
WTI(4)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl/d)
5,000

 
—

 
—

 
—

 
—

 
—

 
Wtd Avg Fixed
$
64.54

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Gas Swaps:
Henry Hub(6)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (MMBtu/d)
35,000

 
—

 
—

 
—

 
—

 
—

 
Wtd Avg Fixed
$
3.00

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—

 
 
 
 
 
 
 
 
 
 
 
 
 
Sold Oil Calls:
WTI(4)
 
 
 
 
 
 
 
 
 
 
 
 
Volume (Bbl/d)
3,670

 
—

 
—

 
—

 
—

 
—

 
Wtd Avg Ceiling
$
64.36

 
$
—

 
$
—

 
$
—

 
$
—

 
$
—


Conference call and webcast
Cimarex will host a conference call tomorrow, November 5, at 11:00 a.m. EST (9:00 a.m. MST). The call will be webcast and accessible on the Cimarex website at www.cimarex.com. To join the live, interactive call, please dial 866-367-3053 ten minutes before the scheduled start time (callers in Canada dial 855-669-9657 and international callers dial 412-902-4216). A replay will be available on the company’s website.


6



Investor Presentation
For more details on Cimarex’s third quarter 2019 results, please refer to the company’s investor presentation available at 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 Permian Basin and Mid-Continent areas of the U.S.

This press release contains forward-looking statements, including statements regarding projected results and future events. In particular, the “2019 Outlook” contains projections for certain 2019 operational and financial metrics. These forward-looking statements are based on management’s judgment as of the date of this press release and include certain risks and uncertainties. Please refer to the company's Annual Report on Form 10-K for the year ended December 31, 2018, filed with the SEC, and other filings including our Current Reports on Form 8-K and Quarterly Reports on Form 10-Q, for a list of certain risk factors that may affect these forward-looking statements.
Actual results may differ materially from company projections and other forward-looking statements and can be affected by a variety of factors outside the control of the company including among other things: oil, NGL and natural gas price levels and volatility; declines in the values of our oil and gas properties resulting in impairments; local commodity price differentials; derivative and hedging activities; higher than expected costs and expenses, including the availability and cost of services and materials; our ability to successfully integrate the business of the recently acquired Resolute Energy Corporation; unknown liabilities related to Resolute; compliance with environmental and other regulations; costs and availability of third party facilities for gathering, processing, refining and transportation; risks associated with operating in one major geographic area; environmental liabilities; the ability to receive drilling and other permits and rights-of-way in a timely manner; development drilling and testing results; the potential for production decline rates to be greater than expected; performance of acquired properties and newly drilled wells; regulatory approvals, including regulatory restrictions on federal lands; legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions and disposal of produced water; unexpected future capital expenditures; economic and competitive conditions; the availability and cost of capital; the ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested; changes in estimates of proved reserves; the success of the company's risk management activities; title to properties; litigation; the ability to complete property sales or other transactions; the effectiveness of controls over financial reporting; and other factors discussed in the company's reports filed with the SEC. Cimarex Energy Co. encourages readers to consider the risks and uncertainties associated with projections and other forward-looking statements. In addition, the company assumes no obligation to publicly revise or update any forward-looking statements based on future events or circumstances.

FOR FURTHER INFORMATION CONTACT
Cimarex Energy Co.
Karen Acierno
303-285-4957
www.cimarex.com
                                            
            
1
Adjusted net income and adjusted cash flow from operations are non-GAAP financial measures. See below for reconciliations of the related GAAP amounts.
2
Debt to total capitalization is calculated by dividing the sum of (i) the principal amount of senior notes and (ii) redeemable preferred stock by the sum of (x) the principal amount of senior notes, (y) redeemable preferred stock, and (z) total stockholders’ equity.

3
PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index, El Paso Perm refers to El Paso Permian Basin index, and Waha refers to West Texas (Waha) Index, all as quoted in Platt’s Inside FERC.

4
WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.


7


5
Index price on basis swaps is WTI NYMEX less the weighted average WTI Midland differential, as quoted by Argus Americas Crude.

6
Henry Hub (located in So. Louisiana) is the official location for futures contracts on the New York Mercantile Exchange (NYMEX).

8


RECONCILIATION OF ADJUSTED NET INCOME

The following reconciles net income as reported under generally accepted accounting principles (GAAP) to adjusted net income (non-GAAP) for the periods indicated.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands, except per share data)
 
 
 
 
 
 
 
 
Net income
$
40,527

 
$
148,354

 
$
176,152

 
$
475,669

Impairment of oil and gas properties (1)
108,879

 
—

 
108,879

 
—

Mark-to-market (gain) loss on open derivative positions
(37,039
)
 
53,507

 
34,831

 
51,128

Loss on early extinguishment of debt
—

 
—

 
4,250

 
—

Acquisition related costs
13

 
—

 
8,404

 
—

Tax impact
(19,472
)
 
(12,253
)
 
(38,309
)
 
(11,810
)
Adjusted net income
$
92,908

 
$
189,608

 
$
294,207

 
$
514,987

Diluted earnings per share
$
0.39

 
$
1.56

 
$
1.72

 
$
5.00

Adjusted diluted earnings per share*
$
0.91

 
$
1.99

 
$
2.93

 
$
5.39

 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
Adjusted diluted**
101,593

 
95,512

 
100,266

 
95,472

______________________________________
(1)
An additional ceiling test impairment is anticipated in the fourth quarter.

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 ADJUSTED CASH FLOW FROM OPERATIONS

The following table provides a reconciliation from generally accepted accounting principles (GAAP) measures of net cash provided by operating activities to adjusted cash flows from operations (non-GAAP) for the periods indicated.
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
2019
 
2018
 
2019
 
2018
 
(in thousands)
Net cash provided by operating activities
$
320,074

 
$
453,474

 
$
984,157

 
$
1,157,813

Change in operating assets and liabilities
40,655

 
(64,792
)
 
63,996

 
(52,386
)
 
 
 
 
 
 
 
 
Adjusted cash flow from operations
$
360,729

 
$
388,682

 
$
1,048,153

 
$
1,105,427



9


Management uses the non-GAAP financial measure of adjusted cash flow from operations as a means of measuring our ability to fund our capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of net cash provided by operating activities. Management believes this non-GAAP financial measure provides useful information to investors for the same reason, and that it is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

 
OIL AND GAS CAPITALIZED EXPENDITURES
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands)
 
Acquisitions:
 
 
 
 
 
 
 
 
Proved
$
2,373

 
$
—

 
$
696,173

 
$
62

 
Unproved
(30,314
)
(1)
10,015

 
1,021,468

 
12,251

 
 
(27,941
)
 
10,015

 
1,717,641

 
12,313

 
 
 
 
 
 
 
 
 
 
Exploration and development:
 
 
 
 
 
 
 
 
Land and seismic
$
18,377

 
$
55,603

 
$
42,456

 
$
76,027

 
Exploration and development
278,083

 
445,429

 
947,002

 
1,113,898

 
 
296,460

 
501,032

 
989,458

 
1,189,925

 
 
 
 
 
 
 
 
 
 
Property sales:
 
 
 
 
 
 
 
 
Proved
$
(9,286
)
 
$
(527,650
)
 
$
(27,314
)
 
$
(557,191
)
 
Unproved
(81
)
 
(12,022
)
 
(9,835
)
 
(17,323
)
 
 
(9,367
)
 
(539,672
)
 
(37,149
)
 
(574,514
)
 
 
 
 
 
 
 
 
 
 
 
$
259,152

 
$
(28,625
)
 
$
2,669,950

 
$
627,724

 
 
 
 
 
 
 
 
 
 
(1) Amount represents an adjustment made to the Resolute preliminary purchase price allocation upon finalization of the quantity of acres acquired.
 







10




CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands, except per share information)
Revenues:
 
 
 
 
 
 
 
 
Oil sales
 
$
435,094

 
$
342,495

 
$
1,196,166

 
$
1,036,402

Gas and NGL sales
 
135,483

 
240,087

 
479,442

 
646,007

Gas gathering and other
 
11,728

 
8,906

 
30,117

 
32,487

 
 
582,305

 
591,488

 
1,705,725

 
1,714,896

Costs and expenses:
 
 
 
 
 
 
 
 
Impairment of oil and gas properties
 
108,879

 
—

 
108,879

 
—

Depreciation, depletion, amortization, and accretion
 
230,172

 
138,195

 
638,122

 
417,555

Production
 
88,300

 
76,272

 
253,259

 
226,758

Transportation, processing, and other operating
 
52,697

 
49,720

 
154,636

 
146,818

Gas gathering and other
 
13,893

 
10,569

 
39,818

 
29,859

Taxes other than income
 
30,873

 
28,431

 
105,600

 
86,549

General and administrative
 
15,499

 
21,148

 
69,494

 
64,208

Stock compensation
 
6,797

 
6,437

 
20,004

 
16,262

(Gain) loss on derivative instruments, net
 
(38,735
)
 
54,006

 
35,949

 
71,546

Other operating expense, net
 
10,141

 
10,015

 
19,057

 
15,470

 
 
518,516

 
394,793

 
1,444,818

 
1,075,025

 
 
 
 
 
 
 
 
 
Operating income
 
63,789

 
196,695

 
260,907

 
639,871

 
 
 
 
 
 
 
 
 
Other (income) and expense:
 
 
 
 
 
 
 
 
Interest expense
 
24,586

 
17,159

 
69,665

 
50,837

Capitalized interest
 
(16,264
)
 
(5,457
)
 
(41,811
)
 
(15,117
)
Loss on early extinguishment of debt
 
—

 
—

 
4,250

 
—

Other, net
 
(139
)
 
(7,544
)
 
(4,547
)
 
(14,716
)
 
 
 
 
 
 
 
 
 
Income before income tax
 
55,606

 
192,537

 
233,350

 
618,867

Income tax expense
 
15,079

 
44,183

 
57,198

 
143,198

Net income
 
$
40,527

 
$
148,354

 
$
176,152

 
$
475,669

 
 
 
 
 
 
 
 
 
Earnings per share to common stockholders:
 
 
 
 
 
 
 
 
Basic
 
$
0.39

 
$
1.56

 
$
1.72

 
$
5.00

Diluted
 
$
0.39

 
$
1.56

 
$
1.72

 
$
5.00

 
 
 
 
 
 
 
 
 
Dividends declared per common share
 
$
0.20

 
$
0.18

 
$
0.60

 
$
0.50

 
 
 
 
 
 
 
 
 
Weighted-average number of shares outstanding:
 
 
 
 
 
 
 
 
Basic
 
99,735

 
93,845

 
98,452

 
93,758

Diluted
 
99,735

 
93,867

 
98,458

 
93,788

 
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
$
40,527

 
$
148,354

 
$
176,152

 
$
475,669

Other comprehensive income:
 
 
 
 
 
 
 
 
Change in fair value of investments, net of tax of ($648), $159, ($220) and $160, respectively
 
(2,198
)
 
539

 
(745
)
 
541

Total comprehensive income
 
$
38,329

 
$
148,893

 
$
175,407

 
$
476,210

 
 
 
 
 
 
 
 
 

11


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
 
 
 
 
 
 
 
 
 
 
 
Three Months Ended
September 30,
 
Nine Months Ended
September 30,
 
 
2019
 
2018
 
2019
 
2018
 
 
(in thousands)
Cash flows from operating activities:
 
 
 
 
 
 
 
 
Net income
 
$
40,527

 
$
148,354

 
$
176,152

 
$
475,669

Adjustments to reconcile net income to net cash
 
 
 
 
 
 
 
 
provided by operating activities:
 
 
 
 
 
 
 
 
Impairment of oil and gas properties
 
108,879

 
—

 
108,879

 
—

Depreciation, depletion, amortization, and accretion
 
230,172

 
138,195

 
638,122

 
417,555

Deferred income taxes
 
15,079

 
43,083

 
57,198

 
142,815

Stock compensation
 
6,797

 
6,437

 
20,004

 
16,262

(Gain) loss on derivative instruments, net
 
(38,735
)
 
54,006

 
35,949

 
71,546

Settlements on derivative instruments
 
1,696

 
(499
)
 
(1,118
)
 
(20,418
)
Loss on early extinguishment of debt
 
—

 
—

 
4,250

 
—

Amortization of debt issuance costs and discounts
 
783

 
727

 
2,285

 
2,183

Changes in non-current assets and liabilities
 
(5,379
)
 
(1,957
)
 
(2,630
)
 
(1,244
)
Other, net
 
910

 
336

 
9,062

 
1,059

Changes in operating assets and liabilities:
 
 
 
 
 
 
 
 
Accounts receivable
 
(37,509
)
 
(26,784
)
 
80,183

 
(11,772
)
Other current assets
 
2,901

 
2,535

 
2,140

 
4,421

Accounts payable and other current liabilities
 
(6,047
)
 
89,041

 
(146,319
)
 
59,737

Net cash provided by operating activities
 
320,074

 
453,474

 
984,157

 
1,157,813

Cash flows from investing activities:
 
 
 
 
 
 
 
 
Acquisition of Resolute Energy, net of cash acquired
 
—

 
—

 
(284,441
)
 
—

Oil and gas capital expenditures
 
(288,623
)
 
(500,677
)
 
(1,000,380
)
 
(1,151,484
)
Sales of oil and gas assets
 
15,314

 
538,525

 
28,547

 
573,367

Sales of other assets
 
425

 
465

 
859

 
990

Other capital expenditures
 
(18,894
)
 
(18,925
)
 
(59,035
)
 
(75,037
)
Net cash (used) provided by investing activities
 
(291,778
)
 
19,388

 
(1,314,450
)
 
(652,164
)
Cash flows from financing activities:
 
 
 
 
 
 
 
 
Borrowings of long-term debt
 
529,000

 
—

 
2,239,310

 
—

Repayments of long-term debt
 
(529,000
)
 
—

 
(2,610,000
)
 
—

Financing, underwriting, and debt redemption fees
 
(7
)
 
—

 
(11,798
)
 
—

Finance lease payments
 
(1,176
)
 
—

 
(2,731
)
 
—

Dividends paid
 
(21,483
)
 
(15,237
)
 
(60,130
)
 
(38,038
)
Employee withholding taxes paid upon the net settlement of equity-classified stock awards
 
(1,752
)
 
(5,464
)
 
(2,406
)
 
(6,410
)
Proceeds from exercise of stock options
 
593

 
962

 
1,267

 
2,211

Net cash used by financing activities
 
(23,825
)
 
(19,739
)
 
(446,488
)
 
(42,237
)
Net change in cash and cash equivalents
 
4,471

 
453,123

 
(776,781
)
 
463,412

Cash and cash equivalents at beginning of period
 
19,414

 
410,823

 
800,666

 
400,534

Cash and cash equivalents at end of period
 
$
23,885

 
$
863,946

 
$
23,885

 
$
863,946


12

CONDENSED CONSOLIDATED BALANCE SHEETS (unaudited)
 
 
 
 
 
 
 
September 30, 2019
 
December 31, 2018
Assets
 
(in thousands, except share and per share information)
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
23,885

 
$
800,666

Accounts receivable, net of allowance
 
425,329

 
454,200

Oil and gas well equipment and supplies
 
49,113

 
55,553

Derivative instruments
 
49,385

 
101,939

Other current assets
 
8,867

 
11,781

Total current assets
 
556,579

 
1,424,139

Oil and gas properties at cost, using the full cost method of accounting:
 
 
 
 
Proved properties
 
20,134,383

 
18,566,757

Unproved properties and properties under development, not being amortized
 
1,539,008

 
436,325

 
 
21,673,391

 
19,003,082

Less – accumulated depreciation, depletion, amortization, and impairment
 
(15,979,664
)
 
(15,287,752
)
Net oil and gas properties
 
5,693,727

 
3,715,330

Fixed assets, net of accumulated depreciation of $373,351 and $324,631, respectively
 
538,179

 
257,686

Goodwill
 
751,836

 
620,232

Derivative instruments
 
5,715

 
9,246

Other assets
 
73,169

 
35,451

 
 
$
7,619,205

 
$
6,062,084

Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
65,925

 
$
106,814

Accrued liabilities
 
430,832

 
379,455

Derivative instruments
 
24,983

 
27,627

Revenue payable
 
207,751

 
194,811

Operating leases
 
67,208

 
—

Total current liabilities
 
796,699

 
708,707

Long-term debt principal
 
2,000,000

 
1,500,000

Less—unamortized debt issuance costs and discounts
 
(15,266
)
 
(11,446
)
Long-term debt, net
 
1,984,734

 
1,488,554

Deferred income taxes
 
446,961

 
334,473

Derivative instruments
 
403

 
2,267

Operating leases
 
199,645

 
—

Other liabilities
 
219,585

 
198,297

Total liabilities
 
3,648,027

 
2,732,298

Redeemable preferred stock - 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, $0.01 par value, 62,500 shares authorized and issued and no shares authorized and issued, respectively
 
81,620

 
—

 
 
 
 
 
Stockholders' equity:
 
 
 
 
Common stock, $0.01 par value, 200,000,000 shares authorized, 101,820,140 and 95,755,797 shares issued, respectively
 
1,018

 
958

Additional paid-in capital
 
3,234,318

 
2,785,188

Retained earnings
 
654,212

 
542,885

Accumulated other comprehensive income
 
10

 
755

Total stockholders' equity
 
3,889,558

 
3,329,786

 
 
$
7,619,205

 
$
6,062,084


13