On February 25, 2002, Key Production and Helmerich & Payne, Inc. (H&P) signed a definitive agreement that provided for H&P to spin off its oil and gas division to its shareholders and for the newly spun company to combine with Key Production to form Cimarex Energy Company. The merger was approved by both Companies’ Board of Directors, Key shareholders and completed on September 30, 2002.

Background of Merger
On November 14, 2000, Helmerich & Payne (H&P) publicly announced that it had retained Petrie Parkman & Co. to act as its financial advisor to identify companies as possible candidates to enter into a business combination transaction with its oil and gas exploration and production business. It was specifically contemplated that a successful transaction could lead, among other things, to the establishment of Cimarex as a separate public entity. Following Helmerich & Payne’s November 14, 2000 announcement, in the remainder of 2000 and in January 2001, Helmerich & Payne and Petrie Parkman contacted nine parties to ascertain their interest in a potential transaction involving the Cimarex business.

In January 2001, Key retained Merrill Lynch & Co. as its financial advisor in connection with a
possible business combination transaction between Key and the Cimarex business. On January 16, 2001, representatives of Helmerich & Payne and Petrie Parkman met with representatives of Key and Merrill Lynch to provide general information about the Cimarex business and to discuss Key’s possible interest in a business combination. The discussions were exploratory in nature.

Throughout 2001, representatives of Key Production and Helmerich & Payne met to discuss a possible merger. From January through mid-February, 2002, technical teams from Key and Helmerich & Payne continued with reciprocal due diligence review and valuation analysis of proved reserves, drilling inventory and undeveloped acreage.

On February 25, 2002, Helmerich & Payne and Key issued a joint press release announcing the
approval of the transaction by their respective boards of directors and the execution of the merger agreement.

Reasons for the Merger

• H&P had an inventory of exploratory prospects located inland along the Texas and Louisiana Gulf Coast, where Key had recently been attempting to expand its exploration efforts
• the assets being contributed by Helmerich & Payne would be largely debt-free, resulting in a combined company with greater financial flexibility than Key would have had on a stand-alone basis
• the increased size of the combined company could allow it to participate in larger scale
  exploratory and development drilling projects and acquisition opportunities than would be
  available to Key on a stand-alone basis
• the combined company would benefit from the expertise and extensive experience of the
  production, operations, engineering and geoscientists currently employed by Cimarex
  the merger will generate increased market visibility and trading liquidity for the combined
  company, which could enhance the market valuation of Cimarex common stock relative to Key common stock
• the merger was structured as a tax-free reorganization for U.S. federal income tax purposes and, accordingly, was not taxable either to Key or its stockholders;
• the potential financial benefits stemming from the enhanced growth prospects of the combined company outweigh the anticipated direct and indirect costs of the merger;