OilVoice - Cimarex Energy Reviews 2009 Results and Provides Operations Update

Cimarex Energy Reviews 2009 Results and Provides Operations Update

Monday, February 08, 2010

Cimarex Energy Co. 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.

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.

2010 Outlook
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, Cimarex expect that 2010 capital expenditures may range from $700-$900 million. The company have a large inventory of drilling opportunities and limited lease expirations.

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.