Corporate Responsibility

Our approach is to analyze every project individually to determine its economic, safety and environmental impacts over the life of the project

CEO Letter

Cimarex is committed to long-term value creation for our shareholders, employees and our communities. As part of that commitment, Cimarex takes environmental responsibility, safety and good corporate governance seriously. No company can succeed over the long run without paying attention to all of its impacts—now and in the future.

There is a widespread belief that the oil and gas industry cannot be counted on to create value over the long run because, in the not-too-distant future, we will be sidelined by alternative energy and restrictive policies. Traditional ESG reporting can encourage this negative picture because it tends to focus on environmental impact without a commensurate discussion of our industry’s unique and irreplaceable benefits.

I want to share with you how we at Cimarex think about the future of oil and gas, and why we believe that our industry and our company will play an important role in helping our world flourish in the decades ahead. The Cimarex long-range perspective requires looking carefully at all of our impacts on our stakeholders—both the benefits and potential concerns highlighted by traditional ESG reporting.

Cimarex creates value by supplying the world with abundant, affordable energy. Energy is the master resource in that it powers all of the machines we use to improve our lives. Energy multiplies the effectiveness of human effort and ingenuity from harvesters to hospital equipment, from cars to airplanes, from dishwashers to data centers. The more affordable energy the world has, the better every aspect of life becomes. Even a casual survey of the world leads to the conclusion that affordable, abundant energy correlates to increased health and life expectancy, lower infant mortality, greater economic growth and opportunity and a cleaner environment.

In the coming decades, the world will need a lot more energy. According to the IEA, over 1 billion people do not have access to electricity and 2.8 billion do not have access to clean cooking facilities, with 2.5 billion relying on biomass – such as burning wood. The good news is that energy poverty is decreasing. Thanks primarily to hydrocarbons, nearly 1.2 billion people have gained access to electricity since 2000. That trend is expected to continue as more of the world’s poor move into the middle class. The EIA projects that world energy consumption will rise by 28% between 2015 and 2040, driven mostly by growing demand in Asia and Africa.

Under any plausible scenario, oil and natural gas will play an essential role in meeting the world’s growing need for abundant, affordable and reliable energy. In its New Policy Scenario, for example, the IEA projects that between 2016 and 2040 worldwide demand for oil and natural gas will increase, with natural gas consumption projected to rise by 45%.

Often we hear a different message: that renewables and electric vehicles (EVs) will make oil and gas obsolete. These claims cannot survive data-driven scrutiny.

Solar and wind are intermittent sources of energy, which means that in the absence of affordable storage systems they require backup from reliable sources of electricity—often natural gas. Since natural gas is the world’s leading source of peak power, the projected growth of renewables will depend on the world using more natural gas, not less.

As for EVs, the reality is that EV manufacturers continue to struggle with profitably, delivering a competitively priced product that consumers want and are heavily dependent on government subsidies. Today, EVs make up about 0.3% of the global fleet and just over 1% of annual sales. The rapid growth in electric vehicle adoption is an exciting trend, and we support the power of free markets in determining the appropriate pace of EV adoption. As always, technological innovations will render even the most informed forecasts meaningless. However, it is important to keep in mind that only 27% of oil demand comes from passenger vehicles. Even if the EV market grows from 4 million automobiles to 400 million in the next 20 years, oil demand is still likely to increase due to rising demand from sectors where oil is truly irreplaceable, such as aviation, petrochemicals and shipping.

Because of their superior ability to supply abundant, affordable and reliable energy, oil and gas will continue to power the world over the coming decades—and Cimarex is well positioned to contribute to that achievement. 

To ensure we are creating value for all of our stakeholders, we give serious thought not only to the benefits of the oil and gas we produce but to the environmental and safety risks of our activities. 

Every energy source—oil, gas, wind, solar—has risks and side-effects. At Cimarex, we believe that the benefits of oil and gas greatly outweigh their risks, and we strive to manage and reduce those risks. Let me give you a few examples. 

One of our top concerns is spills of oil or water. At Cimarex, all of the production facilities we are building have lined containment areas that are designed to prevent spills from touching the earth. We use portable spill-prevention mats during our hydraulic fracturing operation to catch and contain fluids. Furthermore, we have a “no tolerance” policy on spills that requires spills of any amount—oil, chemicals, produced water or fresh water—to be tracked and internally reported. The data we collect on ourselves is a key stepping-stone to improvement.

Water management is also an issue that is high on our list of priorities. Cimarex has taken a different approach to water recycling than many of our peers. In the Delaware Basin, we have made a strategic decision to avoid surface storage of produced water. We believe that the risks of surface storage of produced water should be avoided, if possible. Our Culberson County operations group pioneered an innovative solution for carrying produced water from the wellhead directly to our salt water disposal sites with an option to divert the water on-demand to hydraulic fracturing crews, where it can be filtered and recycled. Through field-wide planning and engineering, we have a system that allows for significant water recycling without the need for surface storage of produced water. It is an elegant, effective and environmentally sound practice.

Finally, we take seriously concerns over the climate impact of oil and gas energy. It is widely accepted that human generation of greenhouse gasses has a warming effect on our climate. To make good decisions about energy, we have to compare the magnitude of potential negative impacts to the irreplaceable benefits of oil and gas—including their ability to help us adapt to an inherently dangerous climate. 

Affordable energy is vital for creating the infrastructure and technology needed to protect ourselves from climate dangers. It makes possible resilient buildings, air conditioning and heating, early warning systems and many other climate protection tools. Thanks to technology powered by abundant and affordable energy, especially oil and gas, we enjoy the safest climate in the history of humanity. Climate-related deaths have decreased by 98% over the last century according to EM-DAT, the International Disasters Database.  

We support sensible efforts to reduce emissions. At Cimarex, we have comprehensive processes in place to mitigate emissions, improve efficiencies and contribute to long-term solutions to manage the impact of climate change and the associated operational and financial risks. With these processes in place, we expect a 20 to 25% reduction in our methane gas emissions by year-end 2018, compared to 2015 levels, despite expected increases in our oil and gas production. 

We believe the conclusion is inescapable: as producers of oil and gas, we are creating long-term value for the world. We produce abundant, affordable and reliable energy without compromising our commitment to safety and the environment, making the world better for our stakeholders now and well into the future. 

Cimarex’s ability to create value over the long term rests ultimately on our corporate governance system. Cimarex is a model of good corporate governance. Our organization is open, transparent and focused on results that are independently measured. Every employee at Cimarex is free to speak their mind and offer their opinion on business practices and decisions. 

Healthy cultures and healthy boardrooms are defined by how they handle bad news. Many things can and do go wrong in our business, and it is vitally important that there is an environment of transparency, challenge and “trust but verify” between an organization and its board. Our board is independent, thoughtful and fully engaged with our tactical and strategic challenges. They understand our business and offer insights and alternative thinking that challenges the Executive Team and the entire organization. The Cimarex Board has direct and open access to our leaders and employees throughout the organization and our directors are encouraged to establish their own independent, unfiltered relationships. I am proud of our Board and our organization and would hold Cimarex up as a model of good corporate governance. 

What I have given you here is only a brief sketch of our impacts. I hope you will take the time to read the supporting material we provide in these pages, including our newest tab, “The Outlook for Cimarex and Our Industry.” It is our attempt to provide the transparent, objective information you need to make informed decisions about our future—a future that we believe will allow our investors, and our communities and our company to flourish. 

We welcome your feedback and thank you for your ongoing support.

  

Thomas E. Jorden
Chairman, President and CEO