Cimarex Reports Third Quarter Results

Friday, November 15, 2002
DENVER – (BUSINESS WIRE) – November 15, 2002 – Cimarex Energy Co. (NYSE: XEC) today announced financial and operating results for the third quarter and first nine months of 2002.

Introduction

On September 30, 2002, Cimarex was spun-off from Tulsa-based Helmerich & Payne, Inc. (H&P) and became a stand-alone company. The spin off was accomplished in the form of a dividend of approximately 26.6 million common shares of Cimarex distributed pro rata to the common stockholders of H&P. Also on that date, pursuant to a merger agreement, Cimarex acquired 100 percent of the outstanding common stock of Denver-based Key Production Company, Inc. in a tax-free exchange of one Cimarex common share for each of the approximately 14.1 million common shares of Key outstanding. The acquisition of Key by Cimarex has been accounted for using the purchase method of accounting and is reflected in the accompanying balance sheet of Cimarex but not in the results of operations for any period presented because the acquisition occurred on the last day of the quarter.

On September 30, 2002, the newly formed Cimarex Board of Directors voted to change the fiscal year of Cimarex from September 30 to December 31. A transition report was filed with the Securities and Exchange Commission (SEC) on November 14, 2002 on Form 10-Q for the quarter ended December 31, 2001. In addition, a conventional quarterly report on Form 10-Q has been filed for Cimarex for the three months and nine months ended September 30, 2002 that includes in its footnotes unaudited pro forma combined financial information as if the acquisition of Key had occurred at the beginning of the periods presented.

Third Quarter 2002

For the third quarter of 2002, Cimarex reported net income of $9.9 million, or $0.37 per share, based on 26.7 million weighted average diluted shares outstanding (all per share amounts are on a diluted basis). This compares to a net loss in the third quarter of 2001 of $43.6 million, or $1.64 per share, which was impacted by a $78.1 million reduction to the carrying value of oil and gas properties pursuant to the ceiling test limitation under full cost accounting.

Revenues in the third quarter of 2002 were $32.5 million compared to $32.6 million in the same period of 2001. Operating cash flow before changes in working capital for the third quarter of 2002 was $23.8 million, or $0.89 per share, versus $28.3 million, or $1.06 per share, in the same period of 2001. Revenues and cash flow in the third quarter of 2002 were negatively impacted by a six percent decline in equivalent production volumes, offset by a seven percent increase in gas prices.

Total gas and oil production volumes for Cimarex (excluding Key’s properties) averaged 114.9 million cubic feet equivalent (MMcfe) per day during the third quarter of 2002 versus 122.5 MMcfe per day a year earlier. The accompanying tables detail quarterly and year-to-date production volumes and average realized prices.

Capital expenditures for exploration and development (exclusive of Key’s activities) during the third quarter of 2002 totaled $20.8 million, down from $26.4 million a year earlier. Reduced capital expenditures reflect a lower level of budgeted expenditures by H&P stemming from its planned spin off of Cimarex and generally lower commodity prices during 2002 compared to 2001.

Year-to-Date 2002

For the first nine months of 2002, Cimarex reported net income of $24 million, or $0.90 per share. This compares to net income in the first nine months of 2001 of $7.7 million, or $0.29 per share.

Revenues for the first nine months of 2002 were $90.1 million. For the same period of 2001, revenues were $160.4 million. Operating cash flow before changes in working capital decreased to $65.1 million, or $2.44 per share, in the nine months ended September 30, 2002, from $108.9 million, or $4.10 per share, in the same period of 2001. The decreases reflect 42 percent lower gas prices, nine percent lower oil prices, and ten percent lower production volumes.

Capital expenditures for the first nine months of 2002 (excluding the acquisition of Key) were $45.9 million, down from $75.2 million during the first three quarters of 2001.

Facts related to the acquisition of Key

On September 30, 2002, Cimarex acquired 100 percent of the outstanding common stock of Key in a tax-free exchange. Total proved reserves of Key at the date of the acquisition were 91.3 billion cubic feet (Bcf) of gas and 9.7 million barrels of oil, or approximately 150 Bcf equivalent. Of total proved reserves, 99 percent were classified as proved developed.

The acquisition has been accounted for using the purchase method of accounting. The following table shows the preliminary calculation and allocation of the purchase price of Key by Cimarex on September 30, 2002. The final amounts are subject to change based on the actual fair value of assets acquired and liabilities assumed. Additional information pertaining thereto may be found in the Cimarex Form 10-Q filed on November 14, 2002:

Conference call and web cast

The third quarter earnings conference call has been scheduled for 9 a.m. Mountain Time (11 a.m. Eastern), Friday, November 15, 2002. Interested parties in the U.S. and Canada may access the call by dialing (800) 881-5262 and requesting the Cimarex Energy Co. teleconference. In addition, a listen-only web cast of the call will be provided at www.cimarex.com. Please go to the website at least ten minutes early to register and to download any necessary audio software. If you are unable to participate in the live broadcast of the call, an audio replay will be available through November 22, 2002 by dialing (800) 642-1687 and entering conference code 6643425.

Cimarex Energy Co. is an independent natural gas and crude oil exploration and production company with operations focused in the Mid-Continent and Gulf Coast regions of the U.S.

This news release may contain projections and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended. Any such projections or statements reflect the Company’s current view with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that such projections will be achieved and actual results could differ materially from those projected. A discussion of important factors that could cause actual results to differ materially from those projected is included in the Company’s periodic report on Form 10-Q filed for the quarter ended September 30, 2002, with the Securities and Exchange Commission.

PRICE AND PRODUCTION DATA

INCOME STATEMENTS

CASH FLOW STATEMENTS

BALANCE SHEETS

PRO FORMA OPERATIONS AND PRODUCTION INFORMATION

The following unaudited pro forma financial information presents the combined results of Cimarex and Key, and was prepared as if the acquisition had occurred at the beginning of the periods presented. The pro forma data presented is based on numerous assumptions and is not necessarily indicative of future results of operations. Included in the pro forma results for the three and nine months ended September 30, 2002 are $5.8 million and $11.0 million, respectively, of nonrecurring general and administrative costs for merger and severance related expenses.

CONTACT: Paul Korus - (303) 295-3995

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