Attached files
| file | filename |
|---|---|
| EX-99.2 - EXHIBIT 99.2 - CIMAREX ENERGY CO | exhibit992pressrelease.htm |
| 8-K - 8-K - CIMAREX ENERGY CO | wardcountydivestxec8k.htm |
Exhibit 99.1
CIMAREX ENERGY CO.
INTRODUCTION TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS
On May 23, 2018, Cimarex Energy Co. (“Cimarex,” “we,” or “us”) entered into a Purchase and Sale Agreement with Callon Petroleum Operating Company (“Callon”) pursuant to which we agreed to sell, and Callon agreed to purchase, oil and gas properties principally located in Ward County, Texas (the “Ward County assets”) for $570.0 million. The transaction closed on August 31, 2018. The purchase price was adjusted to $544.5 million to reflect the resolution of all asserted defects. Taking into account the $28.5 million deposit we received from Callon and $5.9 million of post effective date net revenue and expenditures, Cimarex received $510.1 million at closing. Final settlement, which will reflect any other post-closing adjustments, will occur within 120 days of closing.
The following unaudited pro forma condensed consolidated financial statements and explanatory notes present how our condensed consolidated financial statements may have appeared had the sale of the Ward County assets occurred as of June 30, 2018 (with respect to the balance sheet information presented) and had the sale of the Ward County assets occurred as of January 1, 2017 (with respect to the statement of operations information presented).
The unaudited pro forma condensed consolidated financial statements have been derived from and should be read together with the historical consolidated financial statements and the related notes of Cimarex included in our Annual Report on Form 10-K for the year ended December 31, 2017 and our Quarterly Report on Form 10-Q for the quarter ended June 30, 2018.
The unaudited pro forma condensed consolidated financial statements are presented for illustrative purposes only and do not purport to represent what our results of operations or financial position would actually have been had the sale described above occurred on the dates noted above, or to project our results of operations or financial position for any future periods. The pro forma adjustments are directly attributable to the sale and are based on available information and certain assumptions that management believes are reasonable. In the opinion of management, all adjustments necessary to present fairly the unaudited pro forma financial information have been made.
1
CIMAREX ENERGY CO.
Pro Forma Condensed Consolidated Balance Sheet
(in thousands, except share and per share information)
(Unaudited)
June 30, 2018 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Assets | ||||||||||||
Current assets: | ||||||||||||
Cash and cash equivalents | $ | 410,823 | $ | 514,698 | (a) | $ | 925,521 | |||||
Accounts receivable, net of allowance: | ||||||||||||
Trade | 128,984 | — | 128,984 | |||||||||
Oil and gas sales | 304,255 | — | 304,255 | |||||||||
Gas gathering, processing, and marketing | 11,416 | — | 11,416 | |||||||||
Oil and gas well equipment and supplies | 53,375 | — | 53,375 | |||||||||
Derivative instruments | 72,943 | — | 72,943 | |||||||||
Prepaid expenses | 7,419 | — | 7,419 | |||||||||
Other current assets | 927 | — | 927 | |||||||||
Total current assets | 990,142 | 514,698 | 1,504,840 | |||||||||
Oil and gas properties at cost, using the full cost method of accounting: | ||||||||||||
Proved properties | 18,112,548 | (546,771 | ) | (b) | 17,565,777 | |||||||
Unproved properties and properties under development, not being amortized | 532,715 | (5,038 | ) | (b) | 527,677 | |||||||
18,645,263 | (551,809 | ) | 18,093,454 | |||||||||
Less—accumulated depreciation, depletion, amortization, and impairment | (15,000,443 | ) | — | (15,000,443 | ) | |||||||
Net oil and gas properties | 3,644,820 | (551,809 | ) | 3,093,011 | ||||||||
Fixed assets, net of accumulated depreciation of $312,927 | 238,964 | — | 238,964 | |||||||||
Goodwill | 620,232 | — | 620,232 | |||||||||
Derivative instruments | 2,330 | — | 2,330 | |||||||||
Other assets | 34,905 | — | 34,905 | |||||||||
$ | 5,531,393 | $ | (37,111 | ) | $ | 5,494,282 | ||||||
Liabilities and Stockholders’ Equity | ||||||||||||
Current liabilities: | ||||||||||||
Accounts payable: | ||||||||||||
Trade | $ | 74,596 | $ | — | $ | 74,596 | ||||||
Gas gathering, processing, and marketing | 20,643 | — | 20,643 | |||||||||
Accrued liabilities: | ||||||||||||
Exploration and development | 146,886 | — | 146,886 | |||||||||
Taxes other than income | 24,392 | — | 24,392 | |||||||||
Other | 199,093 | (28,500 | ) | (a) | 170,593 | |||||||
Derivative instruments | 90,480 | — | 90,480 | |||||||||
Revenue payable | 180,869 | (1,302 | ) | (c) | 179,567 | |||||||
Total current liabilities | 736,959 | (29,802 | ) | 707,157 | ||||||||
Long-term debt: | ||||||||||||
Principal | 1,500,000 | — | 1,500,000 | |||||||||
Less—unamortized debt issuance costs and discount | (12,261 | ) | — | (12,261 | ) | |||||||
Long-term debt, net | 1,487,739 | — | 1,487,739 | |||||||||
Deferred income taxes | 201,350 | 201,350 | ||||||||||
Asset retirement obligation | 159,568 | (7,309 | ) | (d) | 152,259 | |||||||
Derivative instruments | 11,511 | — | 11,511 | |||||||||
Other liabilities | 47,768 | — | 47,768 | |||||||||
Total liabilities | 2,644,895 | (37,111 | ) | 2,607,784 | ||||||||
Stockholders’ equity: | ||||||||||||
Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued | — | — | — | |||||||||
Common stock, $0.01 par value, 200,000,000 shares authorized and 95,392,547 shares issued | 954 | — | 954 | |||||||||
Additional paid-in capital | 2,770,532 | — | 2,770,532 | |||||||||
Retained earnings | 112,811 | — | 112,811 | |||||||||
Accumulated other comprehensive income | 2,201 | — | 2,201 | |||||||||
Total stockholders’ equity | 2,886,498 | — | 2,886,498 | |||||||||
$ | 5,531,393 | $ | (37,111 | ) | $ | 5,494,282 | ||||||
2
CIMAREX ENERGY CO.
Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share information)
(Unaudited)
Six Months Ended June 30, 2018 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenues: | ||||||||||||
Oil sales | $ | 693,907 | $ | (55,777 | ) | (e) | $ | 638,130 | ||||
Gas and NGL sales | 405,920 | (6,017 | ) | (e) | 399,903 | |||||||
Gas gathering and other | 23,262 | — | 23,262 | |||||||||
Gas marketing | 319 | — | 319 | |||||||||
1,123,408 | (61,794 | ) | 1,061,614 | |||||||||
Costs and expenses: | ||||||||||||
Depreciation, depletion, and amortization | 276,247 | (30,252 | ) | (f) | 245,995 | |||||||
Asset retirement obligation | 3,113 | (166 | ) | (g) | 2,947 | |||||||
Production | 150,486 | (17,849 | ) | (e) | 132,637 | |||||||
Transportation, processing, and other operating | 97,098 | (1,371 | ) | (e) | 95,727 | |||||||
Gas gathering and other | 19,290 | — | 19,290 | |||||||||
Taxes other than income | 58,118 | (2,890 | ) | (e) | 55,228 | |||||||
General and administrative | 43,060 | — | 43,060 | |||||||||
Stock compensation | 9,825 | — | 9,825 | |||||||||
Loss on derivative instruments, net | 17,540 | — | 17,540 | |||||||||
Other operating expense, net | 5,455 | — | 5,455 | |||||||||
680,232 | (52,528 | ) | 627,704 | |||||||||
Operating income | 443,176 | (9,266 | ) | 433,910 | ||||||||
Other (income) and expense: | ||||||||||||
Interest expense | 33,678 | — | 33,678 | |||||||||
Capitalized interest | (9,660 | ) | — | (9,660 | ) | |||||||
Other, net | (7,172 | ) | — | (7,172 | ) | |||||||
Income before income tax | 426,330 | (9,266 | ) | 417,064 | ||||||||
Income tax expense | 99,015 | (2,152 | ) | (h) | 96,863 | |||||||
Net income | $ | 327,315 | $ | (7,114 | ) | $ | 320,201 | |||||
Earnings per share to common stockholders: | ||||||||||||
Basic | $ | 3.44 | $ | (0.07 | ) | (i) | $ | 3.37 | ||||
Diluted | $ | 3.44 | $ | (0.07 | ) | (i) | $ | 3.37 | ||||
Weighted average shares outstanding: | ||||||||||||
Basic | 93,713 | — | 93,713 | |||||||||
Diluted | 93,748 | — | 93,748 | |||||||||
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
3
CIMAREX ENERGY CO.
Pro Forma Condensed Consolidated Statement of Operations
(in thousands, except per share information)
(Unaudited)
Year Ended December 31, 2017 | ||||||||||||
Historical | Pro Forma Adjustments | Pro Forma | ||||||||||
Revenues: | ||||||||||||
Oil sales | $ | 981,646 | $ | (93,557 | ) | (e) | $ | 888,089 | ||||
Gas sales | 516,936 | (4,940 | ) | (e) | 511,996 | |||||||
NGL sales | 375,421 | (7,570 | ) | (e) | 367,851 | |||||||
Gas gathering and other | 43,751 | — | 43,751 | |||||||||
Gas marketing | 495 | — | 495 | |||||||||
1,918,249 | (106,067 | ) | 1,812,182 | |||||||||
Costs and expenses: | ||||||||||||
Depreciation, depletion, and amortization | 446,031 | (66,254 | ) | (f) | 379,777 | |||||||
Asset retirement obligation | 15,624 | (321 | ) | (g) | 15,303 | |||||||
Production | 262,180 | (27,600 | ) | (e) | 234,580 | |||||||
Transportation, processing, and other operating | 231,640 | (2,701 | ) | (e) | 228,939 | |||||||
Gas gathering and other | 35,840 | — | 35,840 | |||||||||
Taxes other than income | 89,864 | (7,004 | ) | (e) | 82,860 | |||||||
General and administrative | 79,996 | — | 79,996 | |||||||||
Stock compensation | 26,256 | — | 26,256 | |||||||||
Gain on derivative instruments, net | (21,210 | ) | — | (21,210 | ) | |||||||
Other operating expense, net | 1,314 | — | 1,314 | |||||||||
1,167,535 | (103,880 | ) | 1,063,655 | |||||||||
Operating income | 750,714 | (2,187 | ) | 748,527 | ||||||||
Other (income) and expense: | ||||||||||||
Interest expense | 74,821 | — | 74,821 | |||||||||
Capitalized interest | (22,948 | ) | — | (22,948 | ) | |||||||
Loss on early extinguishment of debt | 28,187 | — | 28,187 | |||||||||
Other, net | (11,342 | ) | — | (11,342 | ) | |||||||
Income before income tax | 681,996 | (2,187 | ) | 679,809 | ||||||||
Income tax expense | 187,667 | (602 | ) | (h) | 187,065 | |||||||
Net income | $ | 494,329 | $ | (1,585 | ) | $ | 492,744 | |||||
Earnings per share to common stockholders: | ||||||||||||
Basic | $ | 5.19 | $ | (0.02 | ) | (i) | $ | 5.17 | ||||
Diluted | $ | 5.19 | $ | (0.02 | ) | (i) | $ | 5.17 | ||||
Weighted average shares outstanding: | ||||||||||||
Basic | 93,466 | — | 93,466 | |||||||||
Diluted | 93,509 | — | 93,509 | |||||||||
See accompanying notes to Pro Forma Condensed Consolidated Financial Statements.
4
CIMAREX ENERGY CO.
NOTES TO THE UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Note 1 Basis of Presentation
The unaudited pro forma condensed consolidated financial statements are presented to give effect to the August 31, 2018 sale by Cimarex Energy Co. (“Cimarex,” “we” or “us”) of certain of its oil and gas properties located principally in Ward County, Texas (the “Ward County assets”). The announced sale price for the properties of $570.0 million was reduced to $544.5 million prior to close to reflect adjustments made to resolve all asserted defects, and is subject to certain closing adjustments. Following are descriptions of certain columns included in the accompanying unaudited pro forma condensed consolidated financial statements:
Historical-Represents the historical condensed consolidated balance sheet of Cimarex as of June 30, 2018, the historical condensed consolidated statement of operations of Cimarex for the six months ended June 30, 2018, and the historical condensed consolidated statement of operations of Cimarex for the year ended December 31, 2017.
Pro Forma Adjustments-Represents the adjustments to the historical condensed consolidated financial statements necessary to arrive at the pro forma financial position of Cimarex as of June 30, 2018, as if the sale of the Ward County assets occurred as of June 30, 2018, and the pro forma results of operations of Cimarex for the six months ended June 30, 2018 and the year ended December 31, 2017, as if the sale of the Ward County assets occurred as of January 1, 2017.
Note 2 Pro Forma Adjustments for the Sale of Assets
Condensed Consolidated Balance Sheet
(a) | To reflect receipt of cash proceeds at closing of the sale of the Ward County assets and removal of the $28.5 million deposit received in May 2018. |
(b) | To adjust capitalized oil and gas properties for the effects of the sale of the Ward County assets. |
(c) | To eliminate suspended revenues payable associated with the Ward County assets. |
(d) | To eliminate the asset retirement obligations associated with the Ward County assets. |
Condensed Consolidated Statements of Operations
(e) | To eliminate the revenues and direct operating expenses associated with the Ward County assets. |
(f) | To adjust depletion to give effect to the reduction in the full cost pool, oil and gas reserves, and sales volumes as a result of the sale of the Ward County assets. |
(g) | To eliminate accretion expense attributable to asset retirement obligations associated with the Ward County assets. |
(h) | To adjust income tax expense for the effects of the pro forma adjustments. |
(i) | To adjust earnings per share for the effects of the pro forma adjustments. |
5