Cimarex Energy Provides Q1 2009 Operating Results

Published: 28-Apr-2009

Cimarex Energy Co. (Cimarex Energy) has reported oil and gas production volumes of 489 million cubic feet equivalent per day (MMcfe/d) for the first quarter of 2009, up 3%, compared with the 476.2 MMcfe/d. in the year-ago quarter. The company said that the oil production increased to 10% over year-ago quarter to an average of 25,086 barrels per day.

Cimarex Energy has reported gas production of 338.5 million cubic feet per day (MMcf/d), flat for the first quarter of 2009, compared with the gas production of 339.7 MMcf/d in the year-ago quarter.

The raise in oil production stems from completing horizontal oil wells in the Permian basin which were carry-over activity from the previous year. Flat year-over-year gas production reflects an overall decrease in drilling and completion activity. As a result of weakening commodity prices, the company has continued to scale back drilling. During March 2009, Cimarex Energy was operating just three drilling rigs, down from 43 during the third quarter of 2008 and 22 at year-end.

First-quarter 2009 average realized prices are anticipated to be in the range of $3.75 to $3.85 per thousand cubic feet (Mcf) of gas and $35.45 to $35.95 per barrel of oil. Gas prices slid all through the quarter, with March 2009 prices averaging only $3.20 per Mcf.

Compared to year-end 2008, by March 31, 2009 gas prices have decreased 37%. Period end prices are used in the full-cost accounting ceiling test limitation on the carrying value of oil and gas assets. Because of the gas price decline, which is only partly counterbalanced by a 20% oil price raise, Cimarex Energy’s preliminary analysis has determined it will have a first-quarter 2009 after-tax full-cost ceiling test impairment of $475-$575 million.

Exploration and Development Highlights

Cimarex Energy drilled 41 gross (24 net) wells during the first quarter of 2009, completing 95% as producers. The sharply condensed operated rig count resulted in drilling 68% fewer wells in the first quarter of 2009 as compared to year-ago quarter. At present, the company has three operated rigs drilling in western Oklahoma and one in the Gulf Coast.

Mid-Continent

Cimarex Energy drilled 26 gross (11 net) wells in the first quarter of 2009, completing 96% as producers. First-quarter 2009 mid-continent output averaged 239.0 MMcfe/d, an increase of 16% over year-ago quarter of 2008.

Western Oklahoma drilling totaled 23 gross (9 net) wells with 96% being concluded as producers. The majority of the drilling took place in the Anadarko basin Woodford shale Cana play, where Cimarex Energy took part in 17 gross (8 net) wells. Ever since the Cana play started in late 2007, the company has participated in a total of 49 wells. Of these wells, 36 have been brought online and the remainder is either in the process of being drilled or awaiting completion. The early 30-day average production rate (normalized for a 4,300 foot lateral) estimates 4.5 MMcf/d.

Cimarex Energy has major future drilling potential on its 98,000 net acres in the Cana play and anticipates drilling or taking part in about 50 gross (23 net) wells during 2009.

Permian basin

First-quarter 2009 Permian basin drilling totaled 13 gross (10 net) wells, 92% of which were concluded as producers. Production averaged 181.9 MMcfe/d (52% oil), a 14% rise over the year-ago quarter. The production growth came from completing horizontal oil wells. Cimarex Energy’s first-quarter 2009 Permian basin oil production hit an all-time high of 15,766 barrels per day, up 31% increase over year-ago quarter.

Because of weak oil prices, Cimarex Energy has dropped all of its operated rigs in the Permian basin. More recently, oil prices have enhanced and service costs have fallen. In light of these changes, some select horizontal oil drilling projects have turn out to be economic again and the company will likely resume limited drilling in the Permian starting in the second quarter of 2009.

Gulf Coast/Gulf of Mexico

Cimarex Energy ended drilling and completed two gross (1.9 net) Gulf Coast producers in the first quarter of 2009. First-quarter 2009 onshore Gulf Coast production volumes averaged 53.7 MMcfe/d, down 35% compared with year-ago quarter. Offshore production volumes averaged 10.6 MMcfe/d in the first-quarter of 2009 against 22.1 MMcfe/d in the year-ago quarter. Lower production reflects an inactive drilling program and natural reservoir depletion.

Cimarex Energy at present has one operated rig drilling in the Yegua Cook Mountain play in Hardin county, Texas.

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