credit suisse 25th annual energy summit · credit suisse 25th annual energy summit march 2020....
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CREDIT SUISSE 25TH ANNUAL ENERGY SUMMITMarch 2020
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: $4.0 BILLION
ENTERPRISE VALUE1: $6.0 BILLION
DEBT/EBITDA2: 1.4X
QUARTERLY DIVIDEND: $0.22/SHARE
1 As of February 14, 20202 As of and for the twelve months ended 12/31/19. See Appendix for non-GAAP definitions and reconciliations to nearest comparable GAAP measure.
4CIMAREX ENERGY: PILLARS OF SUCCESSFUL STRATEGY
Cimarex Energy: Pillars of Successful Strategy
PLANNING
EXPLORATION
ENVIRONMENT
COST CONTROL
DIGITAL INNOVATION
2019 Highlights
GENERATED $141 MILLION IN FREE CASH FLOW, EXITED 2019 WITH $95 MILLION CASH
ADJUSTED CASH FLOW FROM OPERATIONS TOTAL $1.5 BILLION
$1.32 BILLION OF TOTAL CAPITAL INVESTMENT, INCLUDING MIDSTREAM
COMPLETED $1.7 BILLION ACQUISITION OF RESOLUTE ENERGY
SOLID EXECUTION: 92 NET WELLS BROUGHT ON PRODUCTION
• Permian well costs down 24% per lateral foot from 2018
• Production expense of $3.34 per Boe, down eight percent from 2018
2019AYOY
Change
Oil Production (MBbls/d) 86.2 27%
Total Production (MBoe/d) 278.5 26%
Total Capital ($ billion) $1.32 16%
Cash Operating Costs1 ($ per Boe) $8.10 6%
Annual Dividend per Share2 $0.80 11%
52019 HIGHLIGHTS
1Cash operating costs include: LOE, Workover, Transportation, Production Tax, G&A2At December 31, 2019
TOTAL COMPANY
$ MILLION 2019A 2020E
DRILLING & COMPLETION (D&C) $ 944 $950 – 1,050
MIDSTREAM/SWD 149 ~ $100
OTHER 222 ~ $200
TOTAL CAPITAL INVESTMENT $ 1,315 $1,250 – 1,350
6CAPITAL INVESTMENT
Capital Investment
1 Includes well facilities, flow back and outside operated wells2 Capitalized overhead, production capital, land and technology
1
2
7PERMIAN REGION WELL COST IMPROVEMENTS
Permian Region Well Cost ImprovementsWELL COST PER LATERAL FOOT (OPERATED)
$1,468
$1,118
$-
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
2018A 2019A 2020E
$/C
OM
PL
ET
ED
LA
TE
RA
L F
EE
T
$/COMPLETED LATERAL FEET
-24%
$1,025 - 1,125
515,000 FEET 708,000 FEET 751,000 FEET
67 NET WELLSCOMPLETED
76 NET WELLSCOMPLETED
81 NET WELLSTO COMPLETE
LATERAL FEET COMPLETED
TOTAL CAPITAL* ASSOCIATED WITH COMPLETED WELLS=WELL COST PER
LATERAL FOOT
2019 IMPROVED WELL COSTS ATTRIBUTED TO:
• Operational efficiency gains
• Lower service costs
EXPECT COST PER FOOT TO DECREASE IN 2020
*Total capital includes drilling, completion, facilities and flow back
82019 GROWTH IN PRODUCTION AND RESERVES
2019 Growth in Production and Reserves
PROVED RESERVES (MMBOE)
559591
620
0
200
400
600
2017 2018 2019
OIL NGL NATURAL GAS
YE19 PROVED RESERVES: 620 MMBOE
• Increase of 5% Y/Y
• Oil reserves up 16%
• PDP now 86% of total proved
• Reserve replacement of 121%
9LONG-TERM STRATEGY, NEAR-TERM PRIORITIES
Long-Term Strategy, Near-Term Priorities
Optimize capital allocationand development program
Capital discipline, consistent investment across cycles
Grow debt-adjusted cash flow and dividend per share
Return on and of capital
Maximize project returns and expand margins
Focused executionand financial strength
STRATEGY PRIORITIES
102020 FREE CASH FLOW GENERATION
2020 Free Cash Flow Generation
2020E FREE CASH FLOW SENSITIVITY
Assumes $2.25 Henry Hub and NGL priced 25% of WTIFCF yield assumes $4.0 market cap at 2/14/20 close
2020 PLAN HIGHLIGHTS
• $1.25 - 1.35 billion total capital investment
• $950 – 1,050 million total D&C investment
• Expect 2020 daily oil production to average 91 – 97 MBbls, up 9% at the midpoint
FREE CASH FLOW POSITIVE ASSUMING $50 WTI AND $2.25 HENRY HUB
0%
2%
4%
6%
8%
10%
12%
$-
$100
$200
$300
$400
$500
$50 $55 $60
FR
EE
CA
SH
FL
OW
YIE
LDF
RE
E C
AS
H F
LO
W (
$M
M)
WTI ($ PER BBL)
DIVIDEND PAYMENT POST-DIVIDEND FCF FCF YIELD
11THREE YEAR FREE CASH FLOW OUTLOOK
Three Year Free Cash Flow OutlookFREE CASH FLOW SENSITIVITY 2020E - 2022E
Assumes $2.25 Henry Hub and NGL priced 25% of WTI
RATABLE ACTIVITY LEADS TO ~10% OIL GROWTH IN EACH OF THE NEXT THREE YEARS
• ~$4 billion in capital over three years
FREE CASH FLOW PRIORITIES
• Grow dividend
• Return cash to shareholders
OTHER USES OF FREE CASH FLOW
• Strengthen balance sheet
Preferred stock reduction
Long term debt reduction $-
$500
$1,000
$1,500
$2,000
$2,500
$50 $55 $60
CU
MU
LA
TIV
E F
RE
E C
AS
H F
LO
W (
$M
M)
WTI ($ PER BBL)
DIVIDEND PAYMENT POST-DIVIDEND FCF
122020 CAPITAL INVESTMENT PROGRAM
2020 Capital Investment Program
TOTAL CAPITAL OF $1.25 – 1.35 BILLION
D&C CAPITAL $950 – 1,050 MILLION• 77% of total capital• Permian Basin ~90% • Mid-Continent Region ~10%
CURRENTLY OPERATING 10 RIGS & TWO COMPLETION CREWS IN PERMIAN
WOLFCAMP73%
BONE SPRING17%
MERAMEC & WOODFORD
10%
D&C CAPITAL$950 – 1,050 MILLION
MID-CONTINENT
132020 DELAWARE BASIN PLANS
2020 Delaware Basin Plans
WELLS ON LINE BY COUNTY
REEVES
CULBERSON
LEA
EDDY
77NET WELLS
WOLFCAMP
BONE SPRING
$855 – $945 MM
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
BASIN AVERAGE: 9,100
2020 DEVELOPMENT PROJECTS
PROJECT NAME WELLS % WIESTIMATED
ON LINE
1 ELECTRIC STATE 5 100 1Q
2 CARRY BACK* 2 80 1Q
3 RIVERBEND 5 81 1Q
4 VACA DRAW 6 57 1Q
5 GOAT 7 97 2Q
6 HIS EMINENCE 5 50 2Q
7 DIXIELAND 8 97 3Q
8 TIM TAM 6 50 3Q
9 BURGOO KING 4 50 3Q
10 CRAWFORD 4 100 3Q
11 DOS EQUIS 4 56 3Q
12 CAPPLETON 8 92 4Q
13 AMERICAN PHAROAH 5 80 4Q
14 MONTROSE 6 50 4Q
15 RED HILLS 6 57 4Q
14DELAWARE BASIN 2020 – 15 NEW DEVELOPMENTS
Delaware Basin 2020 – 15 New Developments
CIMAREX ACREAGE
WOLFCAMP
BONE SPRING
AVALON
11
15
14
10
3 4
2
5
6
7
1
913
8
NEW MEXICO
TEXAS
*Total development of 7 wells, 5 wells came on production late December 2019
15CULBERSON: TOP-TIER OIL WELLS
Culberson: Top-Tier Oil Wells
DELAWARE BASIN CUMULATIVE OIL PRODUCTION BY COUNTY(>8,500 LL, First Prod >2016, Upper Wolfcamp & Bone Spring Formations)
CU
MU
LA
TIV
E O
IL (
MB
BL
S)
ATTRIBUTES OF CULBERSON COUNTY LONG LATERALS• Competitive Oil Production• Shallow Declines• Low Operating Costs (LOE)
COUNTY
38 W
EL
LS
47 213 183 197 426 4623 42 147 159 137 330 4419 26 99 112 81 226 3715 7 46 68 42 144 270
50
100
150
200
250
300
350
400
450
XEC CULBERSON OTHER CULBERSON LEA* LOVING* EDDY* REEVES* WARD*
6 MONTH 12 MONTH 18 MONTH 24 MONTH
*Includes XEC wells
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 94% recycled
water in 2019 • Saved $1.78/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
XEC ACREAGE
INFRASTRUCTURE
OPERATED SWD
SWD INFRASTRUCTURE WOLFCAMP FRAC WATER
32%
87%
97%
94%
2016 2017 2018 2019
RECYCLED PURCHASED
$-
$1.00
$2.00
$3.00
$4.00
XEC CULBERSON* TOTAL XEC PERMIAN
0
100
200
300
400
500
600
700
800
0 200 400 600 800 1,000 1,200 1,400
GEN 1 GEN 2 GEN 3 GEN 4
17CULBERSON: STRONG PRODUCTIVITY, LOW LOE
Culberson: Strong Productivity, Low LOE
ANNUAL CAPITAL INVESTMENT HAS TRIPLED SINCE 2016, INCREASING EACH YEAR
2019 CULBERSON VS PERMIAN BASIN PRODUCTION EXPENSE FRAC GENERATIONS – INCREASING PRODUCTIVITY
PRODUCTION REGIONDAYS ON PRODUCTION
CU
MU
LA
TIV
E O
IL P
RO
DU
CT
ION
(M
BB
L)
*Not limited to Upper Wolfcamp production
$ P
RO
DU
CT
ION
EX
PE
NS
E P
ER
BO
E
18MID-CONTINENT 2020
Mid-Continent 2020
326,000 NET ACRES
WOODFORD: 135,625 NET UNDEVELOPED ACRES (HBP)
MERAMEC: 116,500 NET ACRES (>98% HBP)
10% OF 2020 D&C CAPITAL
CIMAREX ACREAGE
MERAMEC OUTLINE
WOODFORD OUTLINE
OKLAHOMA
1
2020 DEVELOPMENT PROJECTS
PROJECT NAME WELLS % WIESTIMATED
ON LINE
1 LAKE 4 79 3Q
2 KEVIN COM 2 93 3Q
3 FISHER 1 60 3Q
3
2
19STRONG BALANCE SHEET, CONSERVATIVE FINANCIAL POSITION
Strong Balance Sheet, Conservative Financial Position
INVESTMENT GRADE RATED
LOW LEVERAGE, NO NEAR-TERM DEBT MATURITIES
$1.3 BILLION OF LIQUIDITY, INCLUDING $95 MILLION OF CASH (12/31/2019)
AMPLE LIQUIDITY, NO NEAR-TERM DEBT MATURITIES
CASH CREDIT FACILITY DEBT
0.0x
0.5x
1.0x
1.5x
2.0x
2.5x
3.0x
2016 2017 2018 2019
DEBT/TTM EBITDA AVERAGE
XEC DEBT/TTM EBITDA
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
LIQUIDITY12/31/2019
2024 2027 2029
$ M
ILL
ION
S
DEBT MATURITIES
CREATING VALUEAND GENERATINGTOP-TIER RETURNS
PROVENTRACK
RECORD
20CIMAREX 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
21APPENDIX
APPENDIX
222019 GUIDANCE
2020 Guidance
1Q20E 2020E
Production (MBOE/d) 272 – 288 270 – 286
Oil Production (MBbls/d) 87.5 – 91.5 91 – 97
Capital Expenditures ($ Million)
D&C $950 - 1,050
Midstream & Saltwater Disposal (SWD) ~ $100
Other ~ $200
Total Capital $1,250 – 1,350
Expenses ($/BOE) 2020E
Production $3.10 – 3.60
Transportation, processing & other $2.30 – 2.50
DD&A and ARO accretion $8.50 – 9.50
General and administrative $0.95 – 1.15
Taxes other than income (% of oil and gas revenue) 6.0 – 7.0%
23NET WELLS ON PRODUCTION
Net Wells on Production
92
38
2016
35
19
54
2019A IN PROGRESSAT 12/31/19
1Q20E 2Q20E 3Q20E 4Q20E IN PROGRESSAT 12/31/20
NE
T W
EL
L C
OU
NT
PERMIAN BASIN ANADARKO BASIN
BROUGHT 23 NET WELLS ON PRODUCTION IN 4Q19
• 12 wells ahead of schedule
• Added 1,200 Bbl/d to 4Q19 production
EXPECT TO BRING 90 NET WELLS ON PRODUCTION IN 2020
• 54 wells in progress at year end 2020, up 16 wells from year end 2019
2020 BY QUARTERTOTAL: 90 NET
24HEDGES AS OF FEBRUARY 19, 2020
Hedges as of February 19, 20202020 2021
OIL 1Q 2Q 3Q 4Q 1Q 2Q
WTI OIL COLLARS1
Volume (Bbl/d) 39,000 31,000 23,000 23,000 15,000 5,000
Weighted Average Floor 52.40 50.43 49.80 49.80 49.70 50.00
Weighted Average Ceiling 64.48 61.55 60.59 60.59 59.41 60.14
WTI OIL BASIS SWAPS2
Volume (Bbl/d) 32,297 26,000 19,000 19,000 11,000 5,000
Weighted Average Differential3 0.33 0.44 0.75 0.75 0.77 1.02
GAS 1Q 2Q 3Q 4Q 1Q 2Q
PEPL GAS COLLARS4
Volume (MMBtu/d) 90,000 60,000 30,000 30,000 10,000 -
Weighted Average Floor 1.92 1.90 1.85 1.85 1.85 -
Weighted Average Ceiling 2.36 2.28 2.31 2.31 2.31 -
EL PASO PERM GAS COLLARS5
Volume (MMBtu/d) 40,000 30,000 20,000 20,000 - -
Weighted Average Floor 1.40 1.40 1.35 1.35 - -
Weighted Average Ceiling 1.79 1.82 1.66 1.66 - -
WAHA GAS COLLARS6
Volume (MMBtu/d) 50,000 30,000 - - - -
Weighted Average Floor 1.50 1.57 - - - -
Weighted Average Ceiling 1.87 1.97 - - - -
TOTAL NATURAL GAS COLLARS
Volume (MMBtu/d) 180,000 120,000 50,000 50,000 10,111 -
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
4 PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent as quoted on Platt’s Inside FERC5 El Paso Perm refers to El Paso Permian Basin index as quoted on Platt’s Inside FERC6 Waha refers to West Texas Natural Gas Index (“Waha”) as quoted in Platt’s Inside FERC
25PERMIAN BASIN TAKEAWAY
Permian Basin Takeaway
SALES AGREEMENTS IN PLACE FOR OIL VOLUMES THROUGH 2020• ~88% 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 2020• El Paso or Waha index pricing• Committed 125,000 MMBtu per day to Whistler Pipeline
Project; 10 year firm commitment, provides access to Gulf Coast pricing, expected online 2Q21
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
26PERMIAN 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• 63% of total water procured in 2019 was recycled• Cost savings of ~$0.65/bbl of water
IN 2019 – CULBERSON WOLFCAMP WELLS USED 94% RECYCLED WATER FOR COMPLETIONS; REEVES WOLFCAMP WELLS USED 25%
SECURED SWD AGREEMENTS IN LEA COUNTY
27NON-GAAP RECONCILIATION
Non-GAAP Reconciliation
($ IN MILLIONS) 2016 2017 2018 2019
Net income (loss) $ (409) $ 494 $ 792 $ (125)
Income tax expense (benefit) (214) 188 231 (26)
Interest expense, net of capitalized 62 52 47 37
DD&A and ARO accretion 400 462 598 891
EBITDA (161) 1,196 1,668 777
Impairment of oil and gas 758 — — 619
ADJUSTED EBITDA1 597 1,196 1,668 1,396
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 2019
Basic shares outstanding (in 000s) 95,437 95,756 102,145Debt adjusted shares outstanding
YE Debt, net 1,099,466 699,334 1,905,278
TTM stock price 114.00 93.77 57.23
Equivalent shares issued using TTM stock price 9,644 7,458 33,292
Debt adjusted shares using TTM stock price 105,082 103,214 135,437
TWELVE MONTHS ENDEDDECEMBER 31,
($ IN MILLIONS) 2018 2019
Net cash provided by operating activities $ 1,551 $ 1,344
Change in operating assets and liabilities (17) 120
Adjusted cash flow from operations $ 1, 534 $ 1,464
Oil and gas expenditures $ (1,567) $ (1,250)
Other capital expenditures (103) (73)
Free cash flow (136) 141
Dividends paid (55) (82)
Free Cash Flow $ (192) $ 59
28NON-GAAP RECONCILIATION
Non-GAAP Reconciliation
($ IN MILLIONS) DECEMBER 31, 2019
Long-term debt (principal) 2,000
Stockholders equity 3,576
Total capitalization 5,576
Long-term debt/total capitalization 37%
2019
ADDITIONS TO PROVED RESERVES (MMBOE)
Revisions of previous estimates (50.7)
Extensions & discoveries 119.3
Purchase of reserves 63.0
TOTAL ADDITIONS (ALL SOURCES) 131.6
TWELVE MONTHS ENDEDDECEMBER 31,
($ IN MILLIONS) 2016 2017 2018 2019
Long-term debt (principal) $1,500 $1,500 $1,500 $2,000
Adjusted EBITDA 597 1,196 1,668 1,396
Debt/Adjusted EBITDA 2.5x 1.3x 0.9x 1.4x
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.