corporate update · corporate update may 2019. forward-looking statements 2 forward-looking...
TRANSCRIPT
CORPORATE UPDATEMay 2019
2FORWARD-LOOKING STATEMENTS
Forward-looking Statements
Contact:
Karen AciernoVice President – Investor Relations
This presentation contains projections and other forward-looking statements within the meaning of Section 27A ofthe U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These projectionsand statements reflect the Company’s current views with respect to future events and financial performance. Noassurances can be given, however, that these events will occur or that these projections will be achieved, andactual results could differ materially from those projected as a result of certain factors. A discussion of thesefactors is included in the Company’s periodic reports filed with the U.S. Securities and Exchange Commission.
3CIMAREX ENERGY SNAPSHOT
Cimarex Energy Snapshot
NYSE SYMBOL: XEC
MARKET CAP1: $6.8 BILLION
ENTERPRISE VALUE1: $8.8 BILLION
DEBT/EBITDA2: 1.3X
QUARTERLY DIVIDEND: $0.20/SHARE
2019E OIL PRODUCTION GROWTH: 18 - 30%
1 As of May 6, 20192 As of and for the twelve months ended 3/31/19. See Appendix for non-GAAP definitions and reconciliations to nearest comparable GAAP measure.
4CIMAREX ENERGY: MAXIMIZING RETURNS
Cimarex Energy: Maximizing Returns
PREMIERE PORTFOLIO
FOCUSED EXECUTION
FINANCIAL DISCIPLINE
Core positions in the Permian and Anadarko Basins
Focused on maximizing ROR and NPV
Strong returns, cash flow growth, liquidity & optionality
IDEA GENERATIONDriven by rigorous technical evaluation
LOOKBACK EVALUATIONImproves economic returns & operational efficiencies
51Q19 HIGHLIGHTS
1Q19 Highlights
REAFFIRMED 2019 CAPITAL GUIDANCE
RESOLUTE ACQUISITION CLOSED: ADDED 21,100 NET ACRES IN DELAWARE BASIN
$
1Q18 2Q18 3Q18 4Q18 1Q19
26%
1Q19 PRODUCTION: 258.9 MBOE/D; 79.4 MBBL/D
2018A 2019E
18-30%
2019E OIL PRODUCTION: 80-88 MBO/D
6MAXIMIZING VALUE: UNDERSTANDING FRACTURE SURFACE AREA
Maximizing Value: Understanding Fracture Surface Area
20%
30%
40%
50%
60%
70%
80%
90%
$80
$90
$100
$110
$120
$130
$140
$150
8 10 12 13 14 15 16
PR
OJE
CT
RO
R (
%)
CU
MU
LA
TIV
E P
V (
$M
M)
CUMULATIVE PV ($MM) ROR (%)
CUMULATIVE PROJECT: PV vs. ROR
Optimal Spacing – PV: $130-140mm
Increased Interference – Destroying PV: < $130mm
No Interference – Not Maximizing PV: < $130mm
Interference
C
C
B
A
WELLS PER SECTION
B
A
7MAXIMIZING VALUE – PV VS ROR
Maximizing Value – PV vs ROR
-60%
-30%
0%
30%
60%
90%
($4)
($2)
$0
$2
$4
$6INCREMENTAL PV ($MM) ROR (%)
20%
30%
40%
50%
60%
70%
80%
90%
$0
$5
$10
$15
$20
$25
$30
$35
2 4 5 6 7 8 10
CUMULATIVE PV ($MM) ROR (%)
IN SOME RESERVOIRS, JUST ONE INCREMENTAL WELL CAN DESTROY VALUE• Competitive cumulative returns; negative PV and ROR on incremental well
WELLS PER SECTION
PR
OJE
CT
RO
R (
%)
CU
LM
UL
AT
IVE
PV
($M
M)
CUMULATIVE PROJECT: PV vs. ROR
WELLS PER SECTION
PE
R W
EL
L R
OR
(%)
PE
R W
EL
L P
V (
$M
M)
INCREMENTAL WELL: PV vs. ROR
2 4 5 6 7 8
82019 CAPITAL INVESTMENT PROGRAM
2019 Capital Investment Program
E&D CAPITAL OF $1.35 – 1.45 BILLION• Free cash flow neutral at $52.50 WTI; $50 WTI
excluding dividend
D&C CAPITAL $1.10 – 1.20 BILLION• 84% of E&D capital• Permian Basin ~85% • Mid-Continent Region ~15%
ADDITIONAL $60 – 70 MILLION BUDGETED FOR MIDSTREAM
CURRENTLY OPERATING NINE RIGS • Eight in Permian• One in Mid-Continent
WOLFCAMP78%
MERAMEC10%
WOODFORD4%
BONE SPRING4%
AVALON2%
OTHER2%
D&C CAPITAL$1.1 – 1.2 BILLION
9CAPITAL INVESTMENT – Q1
Capital Investment – Q1
1 Drilling, completion, flowback, batteries, well connections/flowlines, SWD system costs2D&C1 + capitalized overhead, production capital, land, technology
$ MILLIONS 1Q19A 2019E
DRILLING & COMPLETION1 (D&C) $ 319 $ 1,100 - 1,200
EXPLORATION & DEVELOPMENT2 (E&D) $ 368 $ 1,350 - 1,450
MIDSTREAM 18 60 - 70
TOTAL CAPITAL INVESTMENT $ 386 $ 1,410 - 1,520
102019 NET WELLS ON PRODUCTION
2019 Net Wells on Production
2019 ACTIVITY: 82 NET WELLS (AVERAGE OPERATED LATERAL LENGTH: 9,050’)
8
30
26
18
38
1QA 2QE 3QE 4QE WELLS WAITING ON COMPLETION AT 12/31/19
PERMIAN BASIN MID-CONTINENT
112019 DELAWARE BASIN PLANS
2019 Delaware Basin Plans
WELLS DRILLED BY COUNTY
REEVES
CULBERSON
LEA
EDDY
65 NET WELLS
WOLFCAMP
AVALON
BONE SPRING
$935–$1,020MM
D&CCAPITAL
AVERAGE LATERAL LENGTH BY COUNTY
0
2,000
4,000
6,000
8,000
10,000
CU
LB
ER
SO
N
RE
EV
ES
ED
DY
LE
A
12DELAWARE BASIN – OVERVIEW
Delaware Basin – Overview
259,000 TOTAL NET ACRES
85% OF 2019 D&C BUDGET
CURRENTLY RUNNING 8 RIGS, 3COMPLETION CREWS
STACKED PAY OPPORTUNITIES• Provides multi-zone development opportunities• Upper and Lower Wolfcamp• Second and Third Bone Spring• Avalon
CIMAREX ACREAGE
WOLFCAMP
BONE SPRING
AVALON
NEW MEXICO
TEXAS
SENTINEL5 WELLS
NEW MEXICO
TEXAS
13DELAWARE BASIN – REEVES COUNTY, TX
Delaware Basin – Reeves County, TX
RESOLUTE ACQUISITION CLOSED
82,853 NET ACRES
38% OF 2019 D&C CAPITAL
TARGETING UPPER WOLFCAMP
FOUR DEVELOPMENTS ON PRODUCTION IN 2019• Sandlot development flowing back
CIMAREX ACREAGE
OPERATED SWD
UPPER WOLFCAMP
HARDSCRABBLE6 WELLS
SANDLOT4 WELLS
SKY PILOT4 WELLS
NEW MEXICO
TEXAS
14DELAWARE BASIN – CULBERSON/WHITE CITY
Delaware Basin – Culberson/White City
100,000+ NET ACRES
JDA WITH CHEVRON IN CULBERSON
34% OF 2019 D&C CAPITAL• Targeting Upper Wolfcamp & Bone Spring
FIVE DEVELOPMENTS ON PRODUCTION IN 2019• Sir Barton & Brokers Tip flowing back
CIMAREX ACREAGE
OPERATED SWD
LOWER WOLFCAMP
UPPER WOLFCAMP
OWL DRAW 3 WELLS
SIR BARTON7 WELLS
ARISTIDES6 WELLS
OLD ROSEBUD4 WELLS
BROKERS TIP7 WELLS
15CULBERSON: TOP-TIER OIL WELLS
Culberson: Top-Tier Oil WellsDELAWARE BASIN CUMULATIVE OIL PRODUCTION BY COUNTY
(>8,500 LL, First Prod >2016, Upper Wolfcamp & Bone Spring Formations)
MB
BL
S -
OIL
MONTHS
ATTRIBUTES OF CULBERSON COUNTY LONG LATERALS• Competitive Oil Production• Shallow Declines• Low Operating Costs (LOE)
COUNTY
CU
MU
LA
TIV
E O
IL (
MB
BL
)
0
50
100
150
200
250
300
350
0 3 6 9 12 15 18
XEC CULBERSON LOVING LEA EDDY WARD REEVES
23 W
EL
LS
122 103 92 15 24519 80 63 47 14 16715 47 32 15 12 1060
50
100
150
200
250
300
350
400
XEC CULBERSON LOVING LEA EDDY WARD REEVES
6 MONTH 12 MONTH 18 MONTH
Note: Decline in cumulative oil production a result of decreasing wells in county average
16CULBERSON: WATER INFRASTRUCTURE DRIVING EFFICIENCIES
Culberson: Water Infrastructure Driving Efficiencies
SALTWATER DISPOSAL (SWD)• Own & operate the system• Improves operating costs• System redundancy reduces downtime• System expanding efficiently with additional
development
WATER REUSE DRIVES EFFICIENCY• On-demand recycled water lowers cost• Wolfcamp completions used 97% recycled
water in 2018 • Saved $1.54/bbl for procured water
ENVIRONMENTAL BENEFITS• Avoids surface storage of produced water• Permanent underground flow helps to
prevent spills• Reduces need for fresh water
RISER: XEC-ENGINEERED ACCESS FOR WATER REUSE
32%
87%
97%
2016 2017 2018
RECYCLED PURCHASED
XEC ACREAGE
INFRASTRUCTURE
OPERATED SWD
SWD INFRASTRUCTURE WOLFCAMP FRAC WATER
17CULBERSON: RESILIENT LONG LATERAL RETURNS
Culberson: Resilient Long Lateral Returns
PAYOUT IN ~15 MONTHS AT $50 OIL*
BASIN-LOW LOE
INVESTMENT OPPORTUNITY HAS TRIPLED SINCE 2016
UPPER WOLFCAMP BTAX IRR*FRAC GENERATIONS – INCREASING PRODUCTIVITY
NYMEX OIL PRICE
0
100
200
300
400
500
600
700
0 200 400 600 800 1,000 1,200 1,400
GEN 1 GEN 2 GEN 3 GEN 4
DAYS ON PRODUCTION
CU
MU
LA
TIV
E O
IL P
RO
DU
CT
ION
(M
BB
L)
0%
50%
100%
150%
200%
250%
$30 $40 $50 $60 $70
$1/Mcf $2/Mcf
*Assumes NYMEX oil pricing, realized gas pricing, NGL price is 30% of oil price – assumes full NGL recovery
18DELAWARE BASIN – LEA COUNTY, NM
Delaware Basin – Lea County, NM
31,384 NET ACRES
TARGETING:• Upper Wolfcamp• Avalon• Bone Spring
ONE DEVELOPMENT ON PRODUCTION IN 2019
NEW MEXICO
TEXAS
CIMAREX ACREAGE
BONE SPRING
AVALON
UPPER WOLFCAMP
VACA DRAW6 WELLS
19MID-CONTINENT – OVERVIEW
Mid-Continent – Overview
326,000 NET ACRES
WOODFORD: 135,625 NET UNDEVELOPED ACRES (HBP)
MERAMEC: 116,500 NET ACRES (>98% HBP)• Three developments on production in 2019• Billy development on flow back
15% OF 2019 D&C CAPITAL
CIMAREX ACREAGE
MERAMEC OUTLINE
WOODFORD OUTLINE
OKLAHOMA
2 WELLSBILLY
3 WELLSWORT
5 WELLSMISS MARY
20DISCIPLINED FINANCIAL POSITIONING
Disciplined Financial Positioning
LIQUIDITY• $1.3 billion of liquidity, including $21 MM of cash
(3/31/2019)
CONSERVATIVE LEVERAGE• 1.3x Debt/TTM EBITDA (3/31/19)
INVESTMENT GRADE DEBT• $500 million 4.375% senior unsecured notes due in 2029• $750 million 3.900% senior unsecured notes due in 2027• $750 million 4.375% senior unsecured notes due in 2024
XEC DEBT/TTM EBITDA
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
2014 2015 2016 2017 2018 1Q19
DEBT/TTM EBITDA AVERAGE
21CASH OPERATING MARGIN EXPANSION
Cash Operating Margin Expansion
Cash operating costs include: LOE, Transportation, Production Tax, G&A; Realized prices exclude hedge gain/loss
DECLINING CASH COSTS SUPPORTING MARGIN EXPANSION
$14.2$10.7 $9.5 $9.6 $8.6 $8.3
68%
55%54%
65%
70%
66%
30%
40%
50%
60%
70%
80%
$0
$10
$20
$30
$40
$50
2014 2015 2016 2017 2018 1Q19
MA
RG
IN %
$/B
OE
OP
EX
& C
AS
H M
AR
GIN
CASH OPERATING COSTS MARGIN MARGIN %
CREATING VALUEAND GENERATINGTOP-TIER RETURNS
PROVENTRACK
RECORD
22CIMAREX ENERGY OVERVIEW
Cimarex Energy Overview
PREMIER PORTFOLIO
CORE POSITIONS INTHE PERMIAN ANDANADARKO BASINS
ENDURINGCULTURE
MAXIMIZING FULL-CYCLE RETURN ON INVESTED CAPITAL
STRONGFINANCIALPOSITION
LOW LEVERAGE ANDLIQUIDITY PROVIDES
OPPORTUNITIES
23APPENDIX
APPENDIX
242019 GUIDANCE
2019 Guidance
2Q19E FY19E
Production (MBOE/d) 263 - 275 260 – 275
Oil Production (MBO/d) 79.5 – 85.5 80.0 – 88.0
Capital Expenditures ($billion)
E & D $1.35 – 1.45
D & C $1.10 – 1.20
Midstream/Other $0.06 – 0.07
Expenses ($/BOE) Remainder of 2019
Production $3.20 – 3.70
Transportation, processing & other $2.10 – 2.50
DD&A and ARO accretion $7.75 – 8.75
General and administrative $1.00 – 1.25
Taxes other than income (% of oil and gas revenue) 5.5 – 6.5%
25HITTING OUR STRIDE: GENERATING FREE CASH FLOW*
Hitting Our Stride: Generating Free Cash Flow*
CUMULATIVE FREE CASH FLOW:• ‘19-’21E: $100-$600 MM• ‘16-’18A: $532 MM outspend
AVERAGE ANNUAL OIL GROWTH:• ‘19-’21E: 15%• ‘16-’18A: 11%
AVERAGE ANNUAL TOTAL CAPITAL*:• ‘19-’21E: $1.50 billion• ‘16-’18A: $1.25 billion
PERFORMANCE DRIVERS:• Consistent development program enhancing efficiencies• Increasing well productivity• Leveraging infrastructure • Lowering production and capital costs
CUMULATIVE FREE CASH FLOW ($MM)
*Free Cash Flow = Cash Flow from Operations – CAPEX – Dividend (Annual $0.80); CAPEX = E&D + Midstream + Other
($532)
$100
$600
($600)
($400)
($200)
$0
$200
$400
$600
2016 - 2018A 2019 - 2021E
$53 WTI
$50 WTI $55 WTI
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
DRILLING &COMPLETION
MIDSTREAM SWD OVERHEAD LAND - $1,500/ACRE
26WHAT ARE FULLY-BURDENED RETURNS?
What are Fully-Burdened Returns?
2017 XEC project – includes 36 gross wells. Assumes flat oil & natural gas realized prices of $55.00/$2.00
ATAX IRR
HALF CYCLE
FULLY-BURDENED
% OF FULLY-BURDENED RETURNS
27ANIMAL KINGDOM WELL PERFORMANCE
Animal Kingdom Well Performance – Corrected
AVERAGE CUMULATIVE PRODUCTION vs TIME
DAYS ON PRODUCTION
-
50
100
150
200
250
300
350
400
450
0 25 50 75 100 125 150 175 200 225
MB
OE
WOLFCAMP C, 3 WELLS WOLFCAMP D, 5 WELLS
EIGHT WELLS ON PRODUCTION FOR 225 DAYS
POSITIVE RESULTS FROM LOWER WOLFCAMP SPACING PILOT• Eight wells tested 14 wells per section
2,786 MBOE PRODUCED IN FIRST 225 DAYS• Wolfcamp C wells average 37% oil• Wolfcamp D wells average 21% oil
LOWER WOLFCAMP DEVELOPMENT PLANS TO BE DETERMINED
28PERMIAN BASIN WATER MANAGEMENT
Permian Basin Water Management
OWN AND OPERATE SALT WATER DISPOSAL (SWD) SYSTEMS IN CULBERSON, EDDY AND REEVES • Improves operating costs
RECYCLING PRODUCED WATER FOR COMPLETION OPERATIONS• 53% of total water procured in 2018 was recycled• Cost savings of ~$1.20/bbl of water
CULBERSON WOLFCAMP WELLS USE 97% RECYCLED WATER FOR COMPLETIONS; REEVES WOLFCAMPWELLS USE 48%
SECURED SWD AGREEMENTS IN LEA COUNTY
29PERMIAN BASIN TAKEAWAY
Permian Basin Takeaway
SALES AGREEMENTS IN PLACE FOR OIL VOLUMES THROUGH 2019• ~80% of oil production on pipe
STRATEGIC PARTNERSHIPS IN CORE AREAS• Pipelines in place• Purchase obligations• Midland index pricing
GAS SALES AGREEMENTS IN PLACE• 96% of forecasted production through 2019; 75% in 2020• El Paso or Waha index pricing
OWN AND OPERATE TWO GAS GATHERING SYSTEMS • Triple Crown – Culberson/Eddy Counties• Matterhorn – Reeves County• Connected to multiple gas processors with inter- and
intrastate outlets• Long-term sales agreements in place for NGL volumes
CIMAREX ACREAGE
ENERGY TRANSFER PIPELINE
EAGLECLAW
OFFLOADING SITE
PLAINS PIPELINE
PLAINS PIPELINE(UNDER CONSTRUCTION)
302018 GROWTH IN PRODUCTION AND RESERVES
2018 Growth in Production and Reserves
OIL/BOE GROWTH OF 18%/17% Y/Y• Pro Forma Ward sale, Oil/BOE growth of 24%/19%
TOTAL E&D CAPITAL – $1.57 BILLION• D&C capital of $1.34 billion • 122 net wells brought online
482
559 591
0
300
600
2016 2017 2018
OIL NGL NATURAL GAS
PROVED RESERVES (MMBOE)
161
190
222
0
50
100
150
200
250
2016 2017 2018
OIL NGL NATURAL GAS
DAILY PRODUCTION (MBOE)
YE18 PROVED RESERVES: 591 MMBOE • Increase of 6% Y/Y • PDP now 85% of total proved• Reserve replacement of 168% of 2018 production
31OIL HEDGES AS OF MAY 8, 2019
Oil Hedges as of May 8, 2019
2019 2020OIL 2Q 3Q 4Q 1Q 2Q
WTI Oil Collars1
Volume (Bbl/d) 34,000 32,000 24,000 16,000 8,000
Weighted Average Floor 53.68 54.81 56.42 56.13 52.25
Weighted Average Ceiling 66.57 68.60 69.40 70.08 64.31
WTI Oil Basis Swaps2
Volume (Bbl/d) 40,500 35,500 27,500 15,000 7,000
Weighted Average Differential3 (6.51) (7.36) (8.36) (0.13) (0.40)
WTI Oil Swaps2
Volume (Bbl/d) 5,000 5,000 5,000 - -
Weighted Average Fixed3 64.54 64.54 64.54 - -
WTI Oil Sold Call
Volume (Bbl/d) 3,670 3,670 3,670 - -
Weighted Average Ceiling 64.36 64.36 64.36 - -
Notes:1 WTI refers to West Texas Intermediate oil prices as quoted on the New York Mercantile Exchange2 Index price on basis swaps is WTI Midland as quoted by Argus Americas Crude 3 Index price on basis swaps is WTI NYMEX less weighted average differential shown in table
32GAS HEDGES AS OF MAY 8, 2019
Gas Hedges as of May 8, 2019
2019 2020GAS 2Q 3Q 4Q 1Q 2Q
PEPL Gas Collars1
Volume (MMBtu/d) 150,000 120,000 90,000 60,000 30,000
Weighted Average Floor 2.03 1.94 1.94 1.96 1.95
Weighted Average Ceiling 2.39 2.32 2.37 2.38 2.26
El Paso Perm Gas Collars2
Volume (MMBtu/d) 90,000 70,000 40,000 20,000 10,000
Weighted Average Floor 1.67 1.49 1.40 1.45 1.50
Weighted Average Ceiling 1.95 1.79 1.73 1.92 2.13
Waha Gas Collars3
Volume (MMBtu/d) 40,000 60,000 60,000 50,000 30,000
Weighted Average Floor 1.41 1.48 1.48 1.50 1.57
Weighted Average Ceiling 1.73 1.82 1.82 1.87 1.97
Total Natural Gas Collars
Volume (MMBtu/d) 280,000 250,000 190,000 130,000 70,000
Henry Hub Gas Swaps
Volume (MMBtu/d) 35,000 35,000 35,000 - -
Weighted Average Floor 3.00 3.00 3.00 - -
Notes:1 PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent as quoted on Platt’s Inside FERC 2 El Paso Perm refers to El Paso Permian Basin index as quoted on Platt’s Inside FERC3 Waha refers to West Texas Natural Gas Index (“Waha”) as quoted in Platt’s Inside FERC.
33NON-GAAP RECONCILIATION
Non-GAAP Reconciliation
($ in Millions) 2016 2017 2018 LTM 3/31/19
Net income (loss) $ (409) $ 494 $ 792 $ 632
Income tax expense (benefit) (214) 188 231 182
Interest expense, net of capitalized 62 52 47 47
DD&A and ARO accretion 400 462 598 656
EBITDA (161) 1,196 1,668 1,517
Impairment of oil and gas 758 — — —
Adjusted EBITDA 597 1,196 1,668 1,517
1The above table provides a reconciliation from generally accepted accounting principles (GAAP) net income (loss) to non-GAAP EBITDA and non-GAAP adjusted EBITDA, which excludes ceiling test impairments
2017 2018 LTM3/31/2019
Basic shares outstanding (in 000s) 95,437 95,756 101,408Debt adjusted shares outstanding
YE Debt, net 1,099,466 699,334 1,979,070
TTM stock price 114.00 93.77 85.36
Equivalent shares issued using TTM stock price 9,644 7,458 23,185
Debt adjusted shares using TTM stock price 105,082 103,214 124,593
34NON-GAAP RECONCILIATION
Non-GAAP ReconciliationThree Months Ended
March 31, ($ in Millions) Mar 31, 2019
($ in Millions) 2018 2019
Long-term debt (principal) 2,000
Net cash provided by operating activities $ 383 $ 250 Redeemable preferred stock 82
Change in operating assets and liabilities (16) 101 Stockholders equity 3,761
Adjusted cash flow from operations $ 367 $ 351 Total capitalization 5,843
Long-term debt/total capitalization 36%2018
Additions to proved reserves (MMBOE)
Revisions of previous estimates (22.7)
Extensions & discoveries 158.5
Purchase of reserves —
Total Additions (all sources) 135.8
Total Capital ($MM) $ 1,570
F&D Costs (all sources) ($/BOE) $ 11.56
Drilling F&D cost (extensions & discoveries) ($/BOE) $ 9.91
Twelve Months EndedDecember 31, LTM
($ in Millions) 2017 2018 3/31/19
Long-term debt (principal) $1,500 $1,500 $2,000
Adjusted EBITDA 1,196 1,668 1,517
Debt/Adjusted EBITDA 1.3x 0.9x 1.3x
1Management uses the non-GAAP measure of adjusted cash flow from operations as a means of measuring the company's ability to fund its capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of cash flow from operating activities. Management believes this non-GAAP measure provides useful information to investors for the same reasons, 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.