CIMAREX ENERGY CO - 10-Q Quarterly Report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

ý Quarterly Report Pursuant To Section 13 or 15(d) of the Securities

Exchange Act of 1934

o Transition Report Pursuant to Section 13 or 15(d) of the Securities

Exchange Act of 1934

For the Quarterly Period ended March 31, 2005

Commission File No. 001-31446

CIMAREX ENERGY CO.

1700 Lincoln Street, Suite 1800

Denver, Colorado 80203-4518

(303) 295-3995

Incorporated in the		Employer Identification
State of Delaware		No. 45-0466694

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o

The number of shares Cimarex Energy Co. common stock outstanding as of March 31, 2005 was 41,774,841.

CIMAREX ENERGY CO.

Table of Contents

PART I

Item 1 - Financial Statements

	Consolidated balance sheets (unaudited) as of March 31, 2005 and December 31, 2004

	Consolidated statements of operations (unaudited) for the three months ended March 31, 2005 and 2004

	Consolidated statements of cash flows (unaudited) for the three months ended March 31, 2005 and 2004

	Consolidated statement of stockholders’ equity (unaudited) for the three months ended March 31, 2005

	Notes to consolidated financial statements

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

Item 3 - Qualitative and Quantitative Disclosures About Market Risk

Item 4 - Controls and Procedures

PART II

Item 6 - Exhibits and Reports on Form 8-K

In this report, we use terms to discuss oil and gas producing activities as defined in Rule 4-10(a) of Regulation S-X. We express quantities of natural gas in terms of thousand cubic feet (Mcf), million cubic feet (MMcf) or billion cubic feet (Bcf). Oil is quantified in terms of barrels (Bbls), thousands of barrels (MBbls) and millions of barrels (MMBbls). Oil is compared to natural gas in terms of equivalent thousand cubic feet (Mcfe) or equivalent million cubic feet (MMcfe). One barrel of oil is the energy equivalent of six Mcf of natural gas. Information relating to our working interest in wells or acreage, “net” oil and gas wells or acreage is determined by multiplying gross wells or acreage by our working interest therein. Unless otherwise specified, all references to wells and acres are gross.

PART I

ITEM 1 - Financial Statements

CIMAREX ENERGY CO.

Consolidated Balance Sheets

(Unaudited)

	March 31,			December 31,
Assets	2005			2004
	(In thousands, except share data)
Current assets:
Cash and cash equivalents	$	113,025		$	115,746
Receivables, net	96,118			103,989
Inventories	14,034			9,742
Deferred income taxes	1,467			2,149
Other current assets	7,943			4,821

Total current assets	232,587			236,447

Oil and gas properties at cost, using the full cost method of accounting:
Proved properties	1,699,528			1,596,704
Unproved properties and properties under development, not being amortized	63,030			72,249
	1,762,558			1,668,953
Less — accumulated depreciation, depletion and amortization	(903,704		)	(866,660		)
Net oil and gas properties	858,854			802,293
Fixed assets, net	17,483			16,109
Goodwill	44,967			44,967
Other assets, net	6,462			5,630
	$	1,160,353		$	1,105,446
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	30,034		$	26,511
Accrued liabilities	66,991			77,362
Revenue payable	37,516			39,129
Total current liabilities	134,541			143,002
Deferred income taxes	241,640			225,285
Other liabilities	38,561			36,447
Stockholders’ equity:
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued	—			—
Common stock, $0.01 par value, 100,000,000 shares authorized, 41,774,841 and 41,729,280 shares issued and outstanding, respectively	418			417
Paid-in capital	252,031			250,248
Unearned compensation	(10,268		)	(10,072		)
Retained earnings	503,396			460,031
Accumulated other comprehensive income	34			88
	745,611			700,712
	$	1,160,353		$	1,105,446

See accompanying notes to consolidated financial statements.

CIMAREX ENERGY CO.

Consolidated Statements of Operations

(Unaudited)

	For the Three Months
	Ended March 31,
	2005			2004
	(In thousands, except per share data)
Revenues:
Gas sales	$	105,874		$	74,332
Oil sales	31,508			21,178
Marketing sales	53,736			36,761
Other, net	589			3,648
	191,707			135,919
Costs and expenses:
Depreciation, depletion and amortization	38,085			26,338
Asset retirement obligation accretion	385			290
Transportation	2,474			2,355
Production	10,171			9,469
Taxes other than income	10,895			8,365
Marketing purchases	53,227			36,300
General and administrative	7,892			4,509
Stock compensation	1,225			468
Financing costs -
Interest expense	188			296
Interest income	(652		)	(87		)
	123,890			88,303

Income before income tax expense	67,817			47,616
Income tax expense	24,452			17,751
Net income	$	43,365		$	29,865
Earnings per share:
Basic	$	1.04		$	0.72
Diluted	$	1.00		$	0.70

Weighted average shares outstanding:
Basic	41,749			41,305
Diluted	43,218			42,615

See accompanying notes to consolidated financial statements.

CIMAREX ENERGY CO.

Consolidated Statements of Cash Flows

(Unaudited)

	For theThree Months
	Ended March 31,
	2005			2004
	(In thousands)

Cash flows from operating activities:
Net income	$	43,365		$	29,865
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion and amortization	38,085			26,338
Asset retirement obligation accretion	385			290
Deferred income taxes	17,312			10,924
Stock compensation	1,225			468
Other	697			1,567
Changes in operating assets and liabilities:
(Increase) decrease in receivables, net	7,871			(13,435		)
(Increase) in inventories	(4,292		)	(2,677		)
(Increase) decrease in other current assets	(3,122		)	1,837
Increase in accounts payable	1,910			9,354
(Decrease) in accrued liabilities	(6,925		)	(1,511		)
Increase (decrease) in other non-current liabilities	(83		)	27
Net cash provided by operating activities	96,428			63,047
Cash flows from investing activities:
Oil and gas expenditures	(96,473		)	(67,376		)
Acquisition of proved oil and gas properties	(243		)	(9		)
Proceeds from sale of assets	37			113
Other expenditures	(3,093		)	(1,952		)
Net cash used by investing activities	(99,772		)	(69,224		)
Cash flows from financing activities:
Common stock reacquired and retired	(67		)	(121		)
Proceeds from issuance of common stock	690			4,371
Net cash provided by financing activities	623			4,250
Net change in cash and cash equivalents	(2,721		)	(1,927		)
Cash and cash equivalents at beginning of period	115,746			40,420
Cash and cash equivalents at end of period	$	113,025		$	38,493

See accompanying notes to consolidated financial statements.

CIMAREX ENERGY CO.

Consolidated Statement of Stockholders’ Equity

For the Three Months Ended March 31, 2005

(Unaudited)

													Accumulated Other
	Common Stock				Paid-in			Unearned			Retained		Comprehensive			Total Shareholders’
	Shares		Amount		Capital			Compensation			Earnings		Income			Equity
					(In thousands)

Balance, December 31, 2004	41,729		$	417	$	250,248		$	(10,072	)	$	460,031	$	88		$	700,712
Net income	—		—		—			—			43,365		—			43,365
Issuance of restricted stock units awards	—		—		—			(979		)	—		—			(979		)
Common stock reacquired and retired	(1	)	—		(67		)	—			—		—			(67		)
Amortization of unearned compensation	—		—		—			783			—		—			783
Exercise of stock options	47		1		689			—			—		—			690
Tax benefit related to stock options exercised	—		—		451			—			—		—			451
Stock Option Compensation Expense	—		—		710			—			—		—			710
Net unrealized losses on marketable securites	—		—		—			—			—		(54		)	(54		)
Balance, March 31, 2005	41,775		$	418	$	252,031		$	(10,268	)	$	503,396	$	34		$	745,611

See accompanying vote an consolidated financial statements.

CIMAREX ENERGY CO.

Notes to Consolidated Financial Statements

March 31, 2005

(Unaudited)

1. Basis of Presentation

The accompanying financial statements are unaudited and were prepared from the records of Cimarex Energy Co. (Cimarex or the Company). We believe these financial statements include all adjustments necessary for a fair presentation of our financial position and results of operations. We prepared these statements on a basis consistent with the annual audited statements and Regulation S-X. Regulation S-X allows us to omit some of the footnote and policy disclosures required by accounting principles generally accepted in the United States of America and normally included in annual reports on Form 10-K. These interim financial statements should be read in conjunction with the financial statements and notes in our Annual Report on Form 10-K for the year ended December 31, 2004.

Cimarex was formed in February 2002 as a wholly-owned subsidiary of Helmerich & Payne, Inc. (H&P). As a result of a dividend declared and paid by H&P on September 30, 2002, in the form of Cimarex common stock, Cimarex was spun-off and became a stand-alone company. Also on September 30, 2002, Cimarex acquired 100 percent of the outstanding common stock of Key Production Company, Inc. (Key) in a tax-free exchange.

The accounts of Cimarex and its subsidiaries are presented in the accompanying consolidated financial statements. All intercompany accounts and transactions were eliminated in consolidation.

We make certain estimates and assumptions to prepare our financial statements in conformity with accounting principles generally accepted in the United States of America. Those estimates and assumptions affect the reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reporting period and in disclosures of commitments and contingencies. Changes in facts and circumstances may result in revised estimates and actual results could differ from those estimates.

The more significant areas requiring the use of management’s estimates and judgments relate to preparation of estimated oil and gas reserves, the use of these oil and gas reserves in calculating depletion, depreciation and amortization, the use of the estimates of future net revenues in computing the ceiling test limitations and estimates of abandonment obligations used in such calculations and in recording asset retirement obligations. Estimates and judgments are also required in determining the reserves for bad debts, the impairments of undeveloped properties, the assessment of goodwill and the valuation of deferred tax assets.

Certain amounts in the accompanying consolidated financial statements for prior periods have been reclassified to conform to the current year presentation.

2. Stock Options

As discussed more fully in the notes to the financial statements of our annual report on Form 10-K for the year ended December 31, 2004, Cimarex’s 2002 Stock Incentive Plan reserves seven million shares of common stock for issuance to directors and employees, including officers. Options granted under the plan after December 5, 2002, expire ten years from the grant date and vest in one-fifth increments on each of the first five anniversaries of the grant date. All grants are made at the closing price of our common stock as reported on the New York Stock Exchange on the date of grant.

Upon the exercise of the options for shares of common stock, the employee is required to hold at least 50 percent of the profit shares, as defined in the plan, until the eighth anniversary of the grant date. The incentive plan provides for accelerated vesting if there is a change in control (as defined in the plan).

For periods prior to January 1, 2005, we applied Accounting Principles Board (APB) Opinion 25, Accounting for Stock Issued to Employees, and related interpretations to account for all stock option grants. No compensation cost had been recognized for stock options granted, as the option prices were equal to the market price of the underlying common stock on the date of grant.

Effective January 1, 2005, we have adopted the provisions of Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share Based Payment. SFAS No. 123R requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation to employees. Utilizing the Black-Scholes option-pricing model, the impact of the adoption resulted in a first-quarter charge to compensation expense of $710 thousand, or an after tax effect of approximately $440 thousand or $0.01 per diluted share.

The fair value of each option award was estimated as of the date of grant using the Black-Scholes option-pricing model. Expected volatilities were based on the historical volatility of our common stock. Historical data was also used to estimate option exercise, expected years until exercise and employee termination within the valuation model. The risk free interest rate is based on U.S. Treasury Securities at a constant five year fixed maturity in effect at the date of the grant.

Had compensation cost for the plan been determined based on the fair value at the grant dates for awards to employees under the plan, consistent with the methodology of SFAS No. 123R for the three months ended March 31, 2004, such compensation expense would have been $867,000. Pro forma net income for the three months ended March 31, 2004 would have been as indicated below:

Net income, as reported	$	29,865
Less: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects	(538		)

Pro forma net income	$	29,327

Earnings per share:
Basic — as reported	$	0.72
Basic — pro forma	$	0.71

Diluted — as reported	$	0.70
Diluted — pro forma	$	0.69

There were no stock options granted to employees during the three months ended March 31, 2005 and 2004.

The following summary reflects the status of stock options granted to employees and directors as of March 31, 2005, and changes during the period:

			Weighted		Weighted
			Average		Average	Aggregate
			Exercise		Remaining	Intrinsic
	Shares		Price		Term	Value
						($000)
Outstanding as of January 1, 2005	2,657,082		$	14.95
Exercised	(47,244	)	14.60
Granted	—		—
Outstanding as of March 31, 2005	2,609,838		$	14.95	6.2 Years	$	62,615
Exercisable as of March 31, 2005	1,726,511		$	13.89	3.6 Years	$	43,250

The total intrinsic value of options exercised during the three months ended March 31, 2005 and 2004 was $1.2 million and $4.1 million, respectively.

The following summary reflects the status of nonvested stock options granted to employees and directors as of March 31, 2005, and changes during the period:

		Weighted
		Average
		Grant Date
	Shares	Fair Value

Nonvested as of January 1, 2005	883,327	$	17.02
Vested	—
Granted	—
Forfeited	—
Nonvested as of March 31, 2005	883,327	$	17.02
Exercisable as of March 31, 2005	1,726,511	$	13.89

As of March 31, 2005 there was $6.2 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under our incentive plan. That cost is expected to be recognized pro rata over a weighted-average period of 7.8 years. As noted above, options vest on the anniversary of the grant date. No shares vested during the three months ended March 31, 2005 and therefore there is no fair value attributable to such shares.

Cash received from option exercises during the three months ended March 31, 2005 and 2004 was approximately $690 thousand and $4.4 million, respectively. The actual tax benefit realized for the tax deductions from option exercises totaled approximately $451.4 thousand and $1.6 million, respectively for the three months ended March 31, 2005 and 2004.

3. Asset Retirement Obligations

On January 1, 2003, we adopted SFAS No. 143, Accounting for Asset Retirement Obligations. This Statement addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The Statement requires that the fair value of a liability for an asset retirement obligation be recognized in the period in which it is incurred if a reasonable estimate of fair value can be made, and that the associated asset retirement costs be capitalized as part of the carrying amount of the long-lived asset. Oil and gas producing companies incur this liability upon acquiring or drilling a well.

The following table reflects the components of the change in the carrying amount of the asset retirement obligation for the three months ended March 31, 2005 (in thousands):


Balance as of January 1, 2005	$	19,762
Liabilities incurred in the current period	691
Liabilities settled in the current period	(17		)
Accretion expense	351

Balance as of March 31, 2005	20,787
Less: Current asset retirement obligation	2,574
Long-term asset retirement obligation	$	18,213

4. Long-Term Debt

At March 31, 2005, we had no debt outstanding. We have the capability to borrow on our Senior Secured Revolving Credit Facility. In October 2002, we entered into the Facility which had a borrowing base of $275 million and commitments from our lenders totaling $200 million.

The Credit Facility is secured by mortgages on certain of our oil and gas properties and the stock of our operating subsidiaries. We are also subject to customary financial and non-financial covenants and are in compliance with those covenants. The term of the Credit Facility was to expire in October 2005.

On October 1, 2004 the Facility was amended with substantially the same terms. The amendment maintains a $200 million commitment amount; however it increases the borrowing base from $275 million to $300 million. Also, the amendment extends the term to October 2009 and does not require any additional mortgages unless outstanding borrowings exceed 50 percent of the borrowing base. Borrowings

under the amended facility bear interest at a LIBOR rate plus 1.125 percent to 1.75 percent, based on borrowing base usage. Unused borrowings under the amendment are subject to a commitment fee of 0.25 percent to 0.50 percent, also depending on borrowing base usage.

5. Income Taxes

Federal income tax expense for the three months ended March 31, 2005 and 2004 differ from the amounts that would be provided by applying the U.S. Federal income tax rate due to the effect of state income taxes and other deductible costs.

The components of the provision for income taxes are as follows (in thousands):

	Three Months Ended
	March 31,
	2005		2004

Current taxes	$	7,140	$	6,827
Deferred taxes	17,312		10,924
	$	24,452	$	17,751

6. Supplemental Disclosure of Cash Flow Information (in thousands):

	Three Months Ended
	March 31,
	2005		2004

Cash paid during the period for:
Interest (net of amounts capitalized)	$	180	$	434
Income taxes (net of refunds received)	$	1,990	$	1,706

7. Earnings Per Share

The calculations of basic and diluted net earnings per common share are presented below:

	Three Months Ended
	March 31,
	2005		2004
	(in thousands, except per share data)

Net income available to common stockholders for basic and diluted shares	$	43,365	$	29,865

Basic weighted-average shares outstanding	41,749		41,305
Incremental shares from assumed exercise of stock options and vesting of restricted stock units	1,469		1,310
Diluted weighted-average shares outstanding	43,218		42,615

Earnings per share:
Basic	$	1.04	$	0.72
Diluted	$	1.00	$	0.70

There were stock options outstanding for 2,609,838 and 3,010,230 shares of Cimarex common stock at March 31, 2005 and 2004, respectively. All stock options were considered potentially dilutive securities for each of the periods presented.

8. Segment Information

Cimarex operates in the oil and gas industry, and is comprised of an exploration and production segment and a natural gas marketing segment. Exploration and production activities are located primarily in Oklahoma, Kansas, Texas, Louisiana and Wyoming. Information presented for our natural gas marketing segment represents business conducted with third parties, usually incidental to sales of our own production.

Summarized financial information of Cimarex’s reportable segments for the three months ended March 31, 2005 and 2004 is shown in the following table:

			Operating
			Profit						Additions
			Before						to Long-
	External		Income				Total		Lived
	Sales		Taxes		DD&A		Assets		Assets
	(In thousands)
Three Months Ended March 31, 2005:
Exploration and Production	$	137,382	$	66,334	$	38,012	$	1,109,863	$	95,545
Natural Gas Marketing	53,736		430		73		50,490		528

Total	$	191,118	$	66,764	$	38,085	$	1,160,353	$	96,073

Three Months Ended March 31, 2004:
Exploration and Production	$	95,510	$	43,778	$	26,278	$	829,060	$	70,267
Natural Gas Marketing	36,761		399		60		33,470		312

Total	$	132,271	44,177		26,338		862,530		70,579

The following table reconciles segment operating profit per the above table to income before taxes as reported on the consolidated statements of operations (in thousands).

	Three Months Ended
	March 31,
	2005			2004
Segment operating profit including depreciation depletion and amortization	$	66,764		$	44,177
Unallocated amounts:
Other revenue	589			3,648
Interest income	652			87
Interest expense	(188		)	(296		)
	$	67,817		$	47,616

9. Commitments and Contingencies

Litigation

As discussed more fully in the notes to the financial statements of our Annual Report on Form 10-K for the year ended December 31, 2004, Cimarex is a defendant to certain claims relating to drainage of gas from two properties that it operates. We cannot predict the outcome of this litigation, and accordingly, no accrual has been recorded in connection with this action. Cimarex has other various litigation related matters in the normal course of business, none of which are material, individually or in aggregate.

Gas Deliveries

As of March 31, 2005, we have guaranteed delivery of 16.3 Bcf of natural gas from 25 wells over a rolling three-year period as reimbursement for connection costs to a pipeline. If the minimum delivery is not met, our maximum exposure is approximately $1.1 million. We have also agreed to reimburse another gatherer for connection costs to its pipeline via delivery of 1 Bcf of natural gas per well for 23 wells. The maximum amount that would be payable, if no gas is delivered, would be approximately $900 thousand.

Parental Guarantees

As of March 31, 2005, Cimarex had $10.5 million of parental guarantees outstanding. These guarantee the credit of certain Cimarex Energy Services, Inc. agreements and are for the benefit of certain counterparties.

Drilling Commitments

The Company has contractual commitments on oil and gas wells approved for drilling or in the process of being drilled at March 31, 2005 of approximately $22.6 million. All of the noted commitments were routine and made in the normal course of our business.

Tax Sharing Agreement

On September 30, 2002, Cimarex entered into an agreement with H&P that provides indemnification of H&P in connection with any future tax claims that may be made relating to the oil and gas exploration and production assets contributed to Cimarex by H&P.

10. Proposed Purchase of Magnum Hunter Resources, Inc.

On January 26, 2005, Cimarex announced that its board of directors had unanimously approved an agreement and plan of merger that provides for the acquisition by Cimarex of Irving, Texas-based Magnum Hunter Resources, Inc. Terms of the merger agreement provide that Magnum Hunter stockholders will receive 0.415 shares of Cimarex common stock for each share of Magnum Hunter common stock that they own. As a result of the merger transaction and based on the number of outstanding shares of Magnum Hunter common stock on March 31, 2005, Cimarex expects to issue approximately 39.5 million common shares to Magnum Hunter’s common stockholders (excluding 2.2 million shares to be issued to wholly owned subsidiaries of Magnum Hunter). After closing, the combined company will have approximately 81.3 million shares outstanding, and Cimarex stockholders will own 51.4 percent and Magnum Hunter stockholders 48.6 percent. The merger will be accounted for as a purchase of Magnum Hunter by Cimarex. The merger remains subject to approval by both companies’ stockholders as well as regulatory approvals.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Throughout this Form 10-Q, we make statements that may be deemed “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities and Exchange Act of 1934. These forward-looking statements include, among others, statements concerning Cimarex’s outlook with regard to timing and amount of future production of oil and gas, price realizations, amounts, nature and timing of capital expenditures for exploration and development, plans for funding operations and capital expenditures, drilling of wells, operating costs and other expenses, marketing of oil and gas and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts. The forward-looking statements in this report are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements.

These risks and uncertainties include, but are not limited to, fluctuations in the price we receive for our oil and gas production, reductions in the quantity of oil and gas sold due to decreased industry-wide demand and/or curtailments in production from specific properties due to mechanical, marketing or other problems, operating and capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates and/or from the number of exploration and development opportunities being greater or fewer than currently anticipated, and increased financing costs due to a significant increase in interest rates. In addition, exploration and development opportunities pursued by Cimarex may not result in productive oil and gas properties. There are also numerous uncertainties inherent in estimating quantities of proved reserves, projecting future rates of production and the timing of development expenditures. These and other risks and uncertainties affecting Cimarex are discussed in greater detail in this report and in other filings by Cimarex with the Securities and Exchange Commission.

The forward-looking statements in this Form 10-Q do not include any risks, uncertainties or forward-looking information associated with our proposed acquisition of Magnum Hunter or the operations of the combined company following the proposed acquisition, if completed. For a discussion of additional risks, uncertainties and forward-looking information related to the proposed acquisition, as well as additional associated cautionary statements, see the discussion under the caption “Cautionary Statement Concerning Forward-Looking Statements” in the Form S-4 Registration Statement (File No. 333-123019) filed by Cimarex with the Securities and Exchange Commission on May 2, 2005.

INTRODUCTION

Cimarex Energy Co. is an independent oil and gas exploration and production company. Our operations are presently focused in Oklahoma, Texas, Kansas and Louisiana. Our primary focus is to explore for and discover new reserves. To supplement our growth, we also consider acquisitions and mergers, such as the proposed acquisition of Magnum Hunter Resources, Inc. On January 26, 2005, Cimarex announced that its board of directors had unanimously approved an agreement and plan of merger that provides for the acquisition by Cimarex of Irving, Texas-based Magnum Hunter Resources, Inc. Terms of the merger agreement provide that Magnum Hunter stockholders will receive 0.415 shares of Cimarex common stock for each share of Magnum Hunter common stock that they own. As a result of the merger transaction and based on the number of outstanding shares of Magnum Hunter common stock on March 31, 2005, Cimarex expects to issue approximately 39.5 million common shares to Magnum Hunter’s common stockholders (excluding 2.2 million shares to be issued to wholly owned subsidiaries of Magnum Hunter). After closing, the combined company will have approximately 81.3 million shares outstanding, and Cimarex stockholders will own 51.4 percent and Magnum Hunter stockholders 48.6 percent. The merger will be accounted for as a purchase of Magnum Hunter by Cimarex. The merger remains subject to approval by both companies’ stockholders as well as regulatory approvals.

Industry and Economic Factors

In managing our business, we must deal with many factors inherent in our industry. First and foremost is wide fluctuation of oil and gas prices. Historically, oil and gas markets have been cyclical and volatile, with future price movements difficult to predict. While our revenues are a function of both production and prices, it is wide swings in prices that have most often had the greatest impact on our results of operations.

Our operations entail significant complexities. Advanced technologies requiring highly trained personnel are utilized in both exploration and production. Even when the technology is properly used, the interpreter still may not know conclusively if hydrocarbons will be present or the rate at which they will be produced. Exploration is a high-risk activity, often times resulting in no commercially productive reservoirs being discovered. Moreover, costs associated with operating within the industry are substantial.

The oil and gas industry is highly competitive. We compete with major and diversified energy companies, independent oil and gas businesses, and individual operators. In addition, the industry as a whole competes with other businesses that supply energy to industrial and commercial end users.

Extensive Federal, state and local regulation of the industry significantly affects our operations. In particular, our activities are subject to stringent environmental regulations. These regulations have increased the costs of planning, designing, drilling, installing, operating, and abandoning oil and gas wells and related facilities. These regulations may become more demanding in the future.

Approach to the Business

The following discussion does not include the effects of a merger with Magnum Hunter.

Profitable growth of our assets will largely depend upon our ability to successfully find and develop new proved reserves. To accommodate an overall acceptable rate of growth, we maintain a blended portfolio of low, moderate and higher risk exploration and development projects. We believe that this approach allows for consistent increases in our oil and gas reserves, while minimizing the chance of failure. To further mitigate risk, we have chosen to seek geologic and geographic diversification by operating in multiple basins. We may also consider the use of transaction-specific hedging of oil and gas prices to reduce price risk. However, to date the use of hedging has not been implemented.

Implementation of our business approach relies on our ability to fund ongoing exploration and development projects with cash flow provided by operating activities and external sources of capital.

We project that 2005 exploration and development expenditures will approximate $350-375 million, up from $296 million in 2004. We are expanding our 2005 program as a result of successful exploration wells drilled in 2004, growth in our western Oklahoma development projects and entry into new basins. Similar to 2004, a large portion of our 2005 expenditures will be directed to our projects in Oklahoma, Texas and Louisiana. A total of $200 million is anticipated to be invested in the mid-continent area of Oklahoma and north Texas. We plan to invest $100 million in the upper Gulf Coast Regions of Texas and Louisiana during 2005. The remainder of our projected 2005 expenditures will be focused in the Permian Basin, California and other western states.

Exploration and development expenditures during the first quarter of 2005 totaled $92.7 million, up from $68.6 million for the first quarter of 2004. In the first quarter of 2005, we participated in drilling 59 gross wells, with an overall success rate of 81 percent. On a net basis, 27 of 35 wells drilled during the first quarter were successful.

Cash flow from operating activities for the three months ended March 31, 2005 totaled $96.4 million, helping to fund our exploration and development expenditure program. Due to positive drilling results during 2004 and the first three months of 2005, three percent of our year-to-date oil and gas production contributing to this cash flow was generated from new wells going on line within the first quarter of 2005.

Based on expected cash provided by operating activities and stockholders’ equity of $745.6 million, a cash balance of $113.0 million and no debt, we believe we are well positioned to fund the projects identified for the remainder of 2005 and beyond.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our discussion and analysis of our financial condition and results of operation are based upon consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses. Our significant accounting policies are described in Note 3 to our consolidated financial statements included in our Form 10-K for the year ended December 31, 2004. In response to SEC Release No. 33-8040, “Cautionary Advice Regarding Disclosure About Critical Accounting Policies,” we have identified certain of these policies as being of particular importance to the portrayal of our financial position and results of operations and which require the application of significant judgment by our management. We analyze our estimates, including those related to oil and gas revenues, reserves and properties, as well as goodwill and contingencies, and base our estimates on historical experience and various other assumptions that we believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. We believe the following critical accounting policies affect our more significant judgments and estimates used in the preparation of our consolidated financial statements.

Revenue Recognition

Revenues from oil and gas sales are recognized based on the sales method, with revenue recognized on actual volumes sold to purchasers. There is a ready market for oil and gas, with sales occurring soon after production.

Oil and Gas Reserves

The process of estimating quantities of oil and gas reserves is complex, requiring significant decisions in the evaluation of all available geological, geophysical, engineering and economic data. The data for a given field may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions. As a result, material revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made to ensure that reserve estimates reported represent the most accurate assessments possible, the subjective decisions and variances in available data for various fields make these estimates generally less precise than other estimates included in the financial statement disclosures. For 2004 revisions of reserve estimates resulted in an increase of 1.2 MMBbls of oil and an increase of 20.1 Bcf of gas, representing eight percent and five percent of proved oil and gas reserves, respectively, as if December 31, 2004.

We use the units-of-production method to amortize our oil and gas properties. Changes in reserve quantities will cause corresponding changes in depletion expense in periods subsequent to the quantity revision or, in some cases, a full cost ceiling limitation charge in the period of the revision. To date, changes in expense resulting from changes in previous estimates of reserves have not been material.

Full Cost Accounting

We use the full cost method of accounting for our oil and gas operations. All costs associated with property acquisition, exploration and development activities are capitalized. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead related to exploration and development activities and other costs incurred for the purpose of finding oil and gas reserves. Salaries and benefits paid to employees directly involved in the exploration and development of properties, as well as other internal costs that can be directly identified with acquisition, exploration and development activities, are also capitalized.

Under full cost accounting rules, capitalized costs, less accumulated amortization and related deferred income taxes, may not exceed an amount equal to the sum of the present value discounted at 10 percent of estimated future net revenues less estimated future expenditures to be incurred in developing and producing the proved reserves, less any related income tax effects. Cash flows used in the calculation of the full cost ceiling limitation are determined based upon estimates of proved oil and gas reserves, future prices, and the costs to extract these reserves. Downward revisions in estimated reserve quantities, increases in future cost estimates or depressed oil and gas prices could cause us to reduce the carrying value of our oil and gas properties. If capitalized costs exceed this limit, the excess must be charged to expense. This is referred to as the “full cost ceiling limitation.” The expense may not be reversed in future periods, even if higher oil and gas prices subsequently increase the full cost ceiling limitation.

At the end of each quarter, a full cost ceiling limitation calculation is made.

Goodwill

We account for goodwill in accordance with Statement of Financial Accounting Standard (SFAS) No. 142, Goodwill and Other Intangible Assets. SFAS No. 142 requires an annual impairment assessment. A more frequent assessment is required if certain events occur that reasonably indicate an impairment may have occurred. The volatility of oil and gas prices may cause more frequent assessments. The impairment assessment requires us to make estimates regarding the fair value of the reporting unit. The estimated fair value is based on numerous factors, including future net cash flows of our estimates of proved reserves as well as the success of future exploration for and development of unproved reserves. These factors are each individually weighted to estimate the total fair value of the reporting unit. If the estimated fair value of the reporting unit exceeds its carrying amount, goodwill of the unit is considered not impaired. If the carrying amount exceeds the estimated fair value, then a measurement of the loss must be performed, with any deficiency recorded as an impairment. We recorded $45.0 million of goodwill in the purchase of Key on September 30, 2002. To date, no related impairment has been recorded.

Contingencies

A provision for contingencies is charged to expense when the loss is probable and the cost can be reasonably estimated. Determining when expenses should be recorded for these contingencies and the appropriate amounts for accrual is a complex estimation process that includes subjective judgment. In many cases, this judgment is based on interpretation of laws and regulations, which can be interpreted differently by regulators and/or courts of law. We closely monitor known and potential legal, environmental and other contingencies and periodically determine when we should record losses for these items based on information available to us. As of March 31, 2005, no liabilities have been accrued for known contingencies. See Note 9 of Notes to Consolidated Financial Statements.

Recent Accounting Developments

In March 2005, the Financial Accounting Standards Board (“FASB”) issued Interpretation 47, Accounting for Conditional Asset Retirement Obligations, which clarifies a more uniform application to recognize a liability for the fair value of a legal obligation to perform asset-retirement activities that are conditional on a future event if the amount can be reasonably estimated. Cimarex is in compliance with the Interpretation.

The Securities and Exchange Commission (“SEC”) issued Staff Accounting Bulletin No. 107 on March 29, 2005, which permits registrants to choose from different valuation models to estimate the fair value of share options and also provides guidance on developing assumptions used in the valuation models. Also, on April 15, 2005, the SEC issued a rule deferring the deadline for adoption of Statement of Financial Accounting Standards (“SFAS”) No. 123R, Share Based Payment, from the first interim period after June 15, 2005 to the first annual period after June 15, 2005. SFAS No. 123R requires companies to recognize in the income statement the grant-date fair value of stock options and other equity-based compensation to employees. Cimarex has adopted the provisions of SFAS No. 123R in the first quarter of 2005, utilizing the Black-Scholes option-pricing model. The impact of the adoption resulted in a first-quarter expense before tax of approximately $710 thousand. For periods prior to January 1, 2005, we applied Accounting Principles Board Opinion 25, Accounting for Stock Issued to Employees, and related interpretations to account for all stock option grants. No compensation cost had been recognized for stock options granted, as the option prices were equal to the market price of the underlying common stock on the date of grant.

Overview

Our results of operations are impacted by oil and gas prices, which are volatile. Realized oil and gas prices increased from $33.80 per barrel and $5.26 per Mcf in the first quarter of 2004 to $47.28 per barrel and $6.00 per MCF in the first quarter of 2005. The majority of our revenues are from oil and gas sales, so price fluctuations can significantly affect our financial results.

Marketing sales and related purchases pertain to activities with third parties conducted by our marketing group. Natural gas sales transactions are conducted with various purchasers under a variety of terms and conditions and supplied by purchasing gas from other producers and marketing companies. For the sales transactions in which the gas is supplied by our own production, related sales and costs are reflected in Cimarex’s gas sales and transportation expense.

Transportation expenses are comprised of costs paid to carry and deliver oil and gas to a specified delivery point. In some cases we receive a payment from purchasers, which is net of transportation costs, and in other instances we separately pay for transportation. If costs are netted in the proceeds received, both the revenues and costs are shown gross in sales and expenses, respectively.

Production costs are composed of lease operating expenses, which generally consist of pumpers’ salaries, utilities, maintenance and other costs necessary to operate our producing properties.

Taxes other than income are taxes assessed by applicable taxing authorities pertaining to production, revenues or the value of our properties. These typically include production severance, ad valorem and excise taxes.

Depreciation, depletion and amortization of our producing properties is computed using the unit-of-production method. Because the economic life of each producing well depends upon the assumed price for production, fluctuations in oil and gas prices may impact the level of proved reserves used in the calculation. Higher prices generally have the effect of increasing reserves, which reduces depletion, while lower prices generally have the effect of decreasing reserves, which increases depletion.

RESULTS OF OPERATIONS

Three Months ended March 31, 2005 Compared with Three Months Ended March 31, 2004

SUMMARY DATA:	For the Three Months Ended
	March 31,
(IN THOUSANDS OR AS INDICATED)	2005			2004

Net Income	$	43,365		$	29,865
Per share-basic	1.04			0.72
Per share-diluted	1.00			0.70

Gas sales	$	105,874		$	74,332
Oil sales	31,508			21,178
Total oil and gas sales	$	137,382		$	95,510

Total gas volume-MMcf	17,636			14,130
Gas volume-MMcf per day	196.0			155.3
Average gas price-per Mcf	$	6.00		$	5.26

Total oil volume-thousand barrels	666			627
Oil volume-barrels per day	7,404			6,886
Average oil price-per barrel	$	47.28		$	33.80

Marketing sales	$	53,736		$	36,761
Marketing purchases	53,227			36,300
Marketing margin	$	509		$	461

Other revenues	$	589		$	3,648

Costs and expenses:
Depreciation, depletion and amortization	$	38,085		$	26,338
Production	10,171			9,469
Transportation	2,474			2,355
Taxes other than income	10,895			8,365
General and administrative	7,892			4,509
Stock compensation	1,225			468
Asset retirement obligation accretion	385			290
Financing costs, net	(464		)	209

We reported net income of $43.4 million, or $1.00 per diluted share in the first quarter of 2005 compared to net income of $29.9 million, or $0.70 per diluted share for the same period in 2004. The change in net income results from the net effect of changes in revenues and costs, as discussed further.

Oil and gas sales for first quarter of 2005 totaled $137.4 million, compared to $95.5 million for the first quarter of 2004. The $41.9 million increase in sales between the two periods results from $19.8 million due to higher production volumes and $22.1 million related to higher commodity prices.

Realized gas prices averaged $6.00 per Mcf for the three months ended March 31, 2005, compared to $5.26 per Mcf for the first quarter of 2004. This 14 percent change increased sales by $13.1 million between the two periods. Realized oil prices averaged $47.28 per barrel for the first quarter of 2005, compared to $33.80 per barrel for the same period in 2004. The increase in sales between periods resulting from this 40 percent improvement in oil prices totaled $9.0 million. We have not entered into any derivative contracts or hedges with respect to our production.

Sales also benefited from higher production volumes. Average gas volumes rose 40.7 MMcf per day in the first quarter of 2005 to 196.0 MMcf per day from 155.3 MMcf per day in the first quarter of 2004, resulting in $18.5 million of incremental revenues. Oil volumes averaged 7,404 barrels per day for the first quarter of 2005, compared to 6,886 barrels per day in the same period of 2004, resulting in increased revenues of $1.3 million. The increase in sales volumes between the periods of 2005 and 2004 is due to positive drilling results.

Marketing sales net of related purchases equaled $509 thousand in the first quarter of 2005 compared to $461 thousand in the first quarter of 2004. These sales relate to marketing activities with outside parties conducted by our marketing group. The financial impact from these activities is small relative to our overall results of operations. Revenues and costs related to marketing of our own production are eliminated in consolidation.

Other revenues equaled $0.6 million for the first three months of 2005, consisting of gains on sale of miscellaneous equipment. Other revenues for the first quarter of 2004 equaled $3.6 million comprised of $3.0 million of net settlements related to litigation for which we were plaintiffs, and $0.6 million pertaining to gains on the sale of miscellaneous equipment.

Costs and Expenses

Costs and expenses (not including marketing purchases or income tax expense) were $70.7 million in the first quarter of 2005 compared to $52.0 million in the same period of 2004. Depreciation, depletion and amortization (DD&A) was the largest component of these increases between periods. DD&A equaled $38.1 million in the first quarter of 2005 compared to $26.4 million in the same period of 2004. On a unit of production basis, DD&A was $1.76 per Mcfe in the first quarter of 2005 compared to $1.47 per Mcfe for the first quarter of 2004. The increases largely stem from higher costs for reserves added during 2004 and 2005.

Production costs rose $0.7 million from $9.5 million ($0.53 per Mcfe) in the first quarter of 2004 to $10.2 million ($0.47 per Mcfe) in the first quarter of 2005. The higher costs in 2005 resulted primarily from higher field operating expenses from an expanded number of properties, and higher maintenance costs. As production increases, however, due to additional successful wells and enhanced production rates from existing wells, costs on a per unit basis is slowly decreasing.

Transportation costs increased from $2.4 million, or $0.13 per Mcfe, in the first quarter of 2004 to $2.5 million, or $0.11 per Mcfe, in the first quarter of 2005. The small increase is the result of expiring contracts being renewed with increased current market rates.

Taxes other than income were $2.5 million greater, rising from $8.4 million in the first quarter of 2004 to $10.9 million in the same period of 2005. The increases between periods resulted from increases in oil and gas sales stemming from higher production volumes and commodity prices.

General and administrative (G&A) expenses increased $3.4 million from $4.5 million in the first quarter of 2004 to $7.9 million in the first quarter of 2005. The increases between periods are due mainly to an expansion of staff and higher employee-benefit costs.

Stock compensation increased from $0.5 million in the first quarter of 2004 to $1.2 million in the first quarter of 2005 due to the $0.7 million expensing of stock options resulting from the adoption of SFAS No. 123R. As of March 31, 2005, there was $6.2 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under our stock incentive plan. That cost is expected to be recognized pro rata over a weighted-average period of 7.8 years.

Income tax expense

Income tax expense totaled $24.5 million for the first quarter of 2005 versus $17.8 million for the same period of 2004. Tax expense equaled a combined Federal and state effective income tax rate of 36.1 percent and 37.3 percent in the first quarters of 2005 and 2004, respectively. The effective rate was slightly lower in 2005 due to the effect of the Income Attributable to Domestic Production Activities Deduction allowed by the American Jobs Creation Act of 2004. We estimate that $7.1 million of our year-to-date 2005 income tax expense is current.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Our primary source of capital is cash flow generated from operating activities. Prices we receive for future oil and gas sales and our level of production will impact these future cash flows. No prediction can be made as to the prices we will receive. Production volumes will in part be dependent upon the amount and results of future capital expenditures. In turn, actual levels of capital expenditures may vary due to many factors, including drilling results, oil and gas prices, industry conditions, prices and availability of goods and services, and the extent to which proved properties are acquired.

Cash flow provided by operating activities for the three months ended March 31, 2005 was $96.4 million, compared to $63.0 million for the three months ended March 31, 2004. The increase in 2005 from the earlier period results primarily from higher oil and gas production and prices.

Higher revenues from oil and gas sales facilitated the funding of our exploration and development expenditure program for the first quarter of 2005.

Cash flow used in investing activities for the three months ended March 31, 2005 was $99.8 million, compared to $69.2 million for the three months ended March 31, 2004. The increase in 2005 stems from a larger exploration and development program.

Cash flow provided by financing activities in the first three months of 2005 was $0.6 million versus $4.3 million in the first three months of 2004. The cash provided by financing activities in 2005 and 2004 resulted from the exercise of employee stock options.

Financial Condition

As of March 31, 2005, stockholders’ equity totaled $745.6 million, up from $700.7 million at December 31, 2004. The increase resulted primarily from first-quarter 2005 net income of $43.4 million. At March 31, 2005 our cash balance equaled $113.0 million.

Working Capital

Working capital at March 31, 2005 totaled $98.1 million, compared to $93.4 million at December 31, 2004. Our receivables are from a diverse group of companies including major energy companies, pipeline companies, local distribution companies and end-users in various industries. The collection of receivables during the period presented has been timely. Historically, losses associated with uncollectible receivables have not been significant.

Financing

In October 2002, we closed on a three-year $400 million Senior Secured Revolving Credit Facility. The Facility had a borrowing base of $275 million and we elected a $200 million commitment amount. The borrowing base was subject to re-determination each April and October. Borrowings under this Facility bore interest at a LIBOR rate plus 1.25 percent to 2.00 percent, based on borrowing base usage. Unused borrowings were subject to a commitment fee of 0.375 percent to 0.50 percent, also depending on borrowing base usage. The Credit Facility was secured by mortgages on our oil and gas properties and the stock of our subsidiaries. We were also subject to customary financial and non-financial covenants. We are in compliance with all such covenants. There were no borrowings under the Facility at March 31, 2005 and December 31, 2004. On October 1, 2004 the Facility was amended. The amendment maintains a $200 million commitment amount; however it increases the borrowing base from $275 million to $300 million. The amendment also extends the term to October 2009 and does not require any additional mortgages unless outstanding borrowings exceed 50 percent of the borrowing base. Borrowings under the amended facility bear interest at a LIBOR rate plus 1.125 percent to 1.75 percent, based on borrowing base usage. Unused borrowings under the amendment are subject to a commitment fee of 0.25 percent to 0.50 percent, also depending on borrowing base usage. Because we have no publicly-traded debt, we have not sought a corporate credit rating.

Contractual Obligations and Material Commitments

We have issued parental guarantees of $10.5 million related to our marketing business for the benefit of companies we purchase gas from.

All of the commitments were routine and were made in the normal course of our business.

Based on current commodity prices and anticipated levels of production, we believe that the estimated net cash generated from operations, coupled with the cash on hand and amounts available under our existing line of credit will be adequate to meet future liquidity needs, including satisfying our financial obligations and funding our operations and exploration and development activities.

2005 Outlook

The following discussion does not include the effects of a merger with Magnum Hunter.

Our projected 2005 exploration and development expenditure program of $350-$375 million will require a great deal of coordination and effort. Though there are a variety of factors that could curtail, delay or even cancel some of our drilling operations, we believe our projected program has a high degree of occurrence. The majority of projects are in hand, drilling rigs are being scheduled, and the historical results of our drilling efforts in these areas warrant pursuit of the projects.

Costs of operations on a per Mcfe basis for 2005 are estimated to approximate levels realized in 2004. Should factors beyond our control fluctuate, our program and realized costs will vary from current projections. These factors could include volatility in commodity prices, changes in the supply of and demand for oil and gas, weather conditions, governmental regulations and more.

Estimates of production levels for 2005 range between 235 to 245 MMcfe per day. The revenues to be realized from the sale of this production will be dependent not only on the level of oil and gas actually produced, but also the prices that will be realized from the sales. During 2004, the average price realized from our gas sales was $5.76 per Mcf and $40.19 per barrel from our oil sales. Current indications are that anticipated prices for 2005 should approximate or exceed 2004 levels. Prices can be highly volatile, however, and the possibility of realized prices for 2005 to vary from current estimates is high.

ITEM 3. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

Price Fluctuations

Our results of operations are highly dependent upon the prices we receive for oil and gas production, and those prices are constantly changing in response to market forces. Nearly all of our revenue is from the sale of oil and gas, so these fluctuations, positive and negative, can have a significant impact on our results of operations and cash flows.

Monthly gas price realizations during the first quarter of 2005 ranged from $5.95 per Mcf to $6.13 per Mcf. Oil prices ranged from $45.24 per barrel to $50.83 per barrel. It is impossible to predict future oil and gas prices with any degree of certainty.

If we wanted to attempt to smooth out the effect of commodity price fluctuations, we could enter into non-speculative hedge arrangements, commodity swap agreements, forward sale contracts, commodity futures, options and other similar agreements. To date, we have not used any of these financial instruments to mitigate commodity price changes.

Any sustained weakness in prices may affect our financial condition and results of operations, and may also reduce the amount of net oil and gas reserves that we can produce economically. Any reduction in reserves, including reductions due to price fluctuations, can have an adverse effect on our ability to obtain capital for our exploration and development activities and could cause us to record a reduction in the carrying value of our oil and gas properties.

Interest Rate Risk

Cimarex may be exposed to risk resulting from changes in interest rates as a result of our variable-rate bank credit facility. However, because we presently have no debt outstanding, the potential effect from changes in interest rates would have no effect on our results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

The Company’s principal executive officer and principal financial officer have evaluated, as required by Rule 13a-15(b) under the Securities Exchange Act of 1934 (the “Exchange Act”), the Company’s disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this report on Form 10-Q. Based on that evaluation, the principal executive officer and principal financial officer concluded that the design and operation of the Company’s disclosure controls and procedures are effective in ensuring that information required to be disclosed by the Company in the

reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.

Changes in Internal Control over Financial Reporting

Effective February 1, 2005, the Company implemented a new accounting information system, affecting on a going forward basis, the Company’s internal control over financial reporting. Such change was planned and performed as scheduled.

There have been no other changes in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that occurred during the Company’s last fiscal quarter that have materially affected or are reasonably likely to materially affect the Company’s internal control over financial reporting.

PART II — OTHER INFORMATION

ITEM 6 — EXHIBITS

(a) Exhibits:

31.1 Certification of F.H. Merelli, Chief Executive Officer of Cimarex Energy Co. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2 Certification of Paul Korus, Chief Financial Officer of Cimarex Energy Co. pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1 Certification of F.H. Merelli, Chief Executive Officer of Cimarex Energy Co. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

32.2 Certification of Paul Korus, Chief Financial Officer of Cimarex Energy Co. pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

May 9, 2005


		CIMAREX ENERGY CO.

		/s/ Paul Korus
		Paul Korus
		Vice President, Chief Financial Officer and Treasurer
		(Principal Financial Officer)

		/s/ James H. Shonsey
		James H. Shonsey
		Chief Accounting Officer and Controller
		(Principal Accounting Officer)