SCOTIA HOWARD WEIL 47TH ANNUAL ENERGY CONFERENCE March 2019
Forward-looking Statements This presentation contains projections and other forward-looking statements within the meaning of Section 27A of the U.S. Securities Act of 1933 and Section 21E of the U.S. Securities Exchange Act of 1934. These projections and statements reflect the Company s current views with respect to future events and financial performance. No assurances can be given, however, that these events will occur or that these projections will be achieved, and actual results could differ materially from those projected as a result of certain factors. A discussion of these factors is included in the Company s periodic reports filed with the U.S. Securities and Exchange Commission. Contact: Karen Acierno Vice President Investor Relations kacierno@cimarex.com 303-285-4957 FORWARD-LOOKING STATEMENTS 2
Cimarex Energy Snapshot NYSE SYMBOL: XEC MARKET CAP 1 : $6.9 BILLION ENTERPRISE VALUE 1 : $8.9 BILLION DEBT/EBITDA 2 : 0.9X ANNUAL DIVIDEND: $0.80 (1.1% YIELD) 4Q18 PRODUCTION: 251 MBOE/D, 80 MBO/D 2019E CAPEX: $1.35 - $1.45 BILLION 2019E PRODUCTION GROWTH: 13%-22% 1 As of March 20, 2019 2 As of and for the twelve months ended 12/31/18. See Appendix for non-gaap definitions and reconciliations to nearest comparable GAAP measure. CIMAREX ENERGY SNAPSHOT 3
Cimarex Energy: Maximizing Returns PREMIERE PORTFOLIO Core positions in the Permian and Anadarko Basins IDEA GENERATION Driven by rigorous technical evaluation FOCUSED EXECUTION Focused on maximizing ROR and NPV LOOKBACK EVALUATION Improves economic returns & operational efficiencies FINANCIAL DISCIPLINE Strong returns, cash flow growth, liquidity & optionality CIMAREX ENERGY: MAXIMIZING RETURNS 4
What are Fully-Burdened Returns? % OF FULLY-BURDENED RETURNS 100% FULLY- BURDENED 90% 80% HALF CYCLE 70% 60% 50% 40% 30% 20% 10% 0% DRILLING & COMPLETION MIDSTREAM SWD OVERHEAD LAND - $1,500/ACRE ATAX IRR 2017 XEC project includes 36 gross wells. Assumes flat oil & natural gas realized prices of $55.00/$2.00 WHAT ARE FULLY-BURDENED RETURNS? 5
CULMULATIVE PV ($MM) PROJECT ROR (%) PER WELL PV ($MM) PER WELL ROR (%) Maximizing Value PV vs ROR CUMULATIVE PROJECT: PV vs. ROR INCREMENTAL WELL: PV vs. ROR $140 CUMULATIVE PV ($MM) ROR (%) 90% $12 INCREMENTAL PV ($MM) ROR % 80% $130 80% $9 60% $120 70% $6 40% $110 60% $3 20% $100 50% $0 0% $90 40% ($3) -20% $80 8 10 12 13 14 15 16 30% ($6) 8 10 12 13 14 15 16-40% WELLS PER SECTION WELLS PER SECTION IN SOME RESERVOIRS, JUST ONE INCREMENTAL WELL CAN DESTROY VALUE Competitive cumulative returns; negative PV and ROR on incremental well MAXIMIZING VALUE PV VS ROR 6
CUMULATIVE PV ($MM) PROJECT ROR (%) Maximizing Value: Understanding Fracture Surface Area CUMULATIVE PROJECT: PV vs. ROR No Interference Not Maximizing PV: < $130mm CUMULATIVE PV ($MM) ROR (%) $150 $140 C 90% 80% A $130 $120 A 70% 60% Increased Interference Destroying PV: < $130 $110 $100 B 50% 40% B $90 30% Optimal Spacing PV: $130-140mm $80 8 10 12 13 14 15 16 20% WELLS PER SECTION C Interference MAXIMIZING VALUE: UNDERSTANDING FRACTURE SURFACE AREA 7
CULMULATIVE PV ($MM) PROJECT ROR (%) PER WELL PV ($MM) PER WELL ROR (%) Maximizing Value PV vs ROR CUMULATIVE PROJECT: PV vs. ROR INCREMENTAL WELL: PV vs. ROR $35 CUMULATIVE PV ($MM) ROR (%) 90% $6 INCREMENTAL PV ($MM) ROR (%) 90% $30 $25 80% 70% $4 60% $20 60% $2 30% $15 50% $0 0% $10 40% $5 30% ($2) -30% $0 2 4 5 6 7 8 10 20% ($4) 2 4 5 6 7 8-60% WELLS PER SECTION WELLS PER SECTION IN SOME RESERVOIRS, JUST ONE INCREMENTAL WELL CAN DESTROY VALUE Competitive cumulative returns; negative PV and ROR on incremental well MAXIMIZING VALUE PV VS ROR 8
2019 Capital Investment Program WOODFORD 4% MERAMEC 10% AVALON BONE SPRING 2% 4% OTHER 2% D&C CAPITAL $1.1 1.2 BILLION WOLFCAMP 78% E&D CAPITAL OF $1.35 1.45 BILLION Down 11% from 2018 Free cash flow neutral at $52.50 WTI; $50 WTI excluding dividend D&C CAPITAL $1.1 1.2 BILLION 84% of E&D capital Permian Basin ~85% Mid-Continent Region ~15% ADDITIONAL $60 70 MILLION BUDGETED FOR MIDSTREAM CURRENTLY OPERATING 9 RIGS Eight in Permian One in Mid-Continent 2019 CAPITAL INVESTMENT PROGRAM 9
Delaware Basin Overview NEW MEXICO TEXAS 259,000 TOTAL NET ACRES 85% OF 2019 D&C BUDGET CURRENTLY RUNNING 8 RIGS, 3 COMPLETION CREWS STACKED PAY OPPORTUNITIES Provides multi-zone development opportunities Upper and Lower Wolfcamp Second and Third Bone Spring Avalon CIMAREX ACREAGE WOLFCAMP BONE SPRING AVALON DELAWARE BASIN OVERVIEW 10
Delaware Basin Reeves County, TX SKY 4 WELLS RESOLUTE ACQUISITION CLOSED SANDLOT 4 WELLS SENTINEL 5 WELLS 82,853 NET ACRES 38% OF 2019 D&C CAPITAL HARDSCRABBLE 6 WELLS TARGETING UPPER WOLFCAMP FOUR DEVELOPMENTS ON PRODUCTION IN 2019 NEW MEXICO TEXAS CIMAREX ACREAGE UPPER WOLFCAMP OPERATED SWD DELAWARE BASIN REEVES COUNTY, TX 11
Delaware Basin Culberson/White City NEW MEXICO TEXAS 100,000+ NET ACRES JDA WITH CHEVRON IN CULBERSON OWL DRAW 3 WELLS SIR BARTON 7 WELLS BROKERS TIP 7 WELLS CIMAREX ACREAGE UPPER WOLFCAMP LOWER WOLFCAMP OPERATED SWD ARISTIDES 6 WELLS OLD ROSEBUD 4 WELLS 34% OF 2019 D&C CAPITAL Targeting Upper Wolfcamp & Bone Spring NEW 3RD BONE SPRING LANDING ZONE ADDS RESOURCE POTENTIAL Kingman 45 State Unit 3H IP30: 2,917 BOE/d, 1,965 BO/d WHITE CITY: UPPER WOLFCAMP FURTHER DELINEATED Crawford 27-26 FEE 2H IP30: 2,455 BOE/d, 1,701 BO/d FIVE DEVELOPMENTS ON PRODUCTION IN 2019 DELAWARE BASIN CULBERSON/WHITE CITY 12
100 Wells MBBLS - OIL MBBLS - OIL CUMULATIVE OIL (MBBL) Culberson: Top-Tier Oil Wells DELAWARE BASIN CUMULATIVE OIL PRODUCTION BY COUNTY (>8,500 LL, First Prod >2016, Upper Wolfcamp & Bone Spring Formations) 300 6 MONTH 12 MONTH LEA XEC CULBERSON EDDY REEVES WARD LOVING 350 250 200 150 300 250 200 150 100 50 100 50 0 47 18 15 74 37 192 126 19 17 121 76 LEA XEC CULBERSON EDDY REEVES WARD LOVING 0 0 2 4 6 8 10 12 COUNTY MONTHS ATTRIBUTES OF CULBERSON COUNTY LONG LATERALS Competitive Oil Production Shallow Declines Low Operating Costs (LOE) CULBERSON: TOP-TIER OIL WELLS 13
Culberson: Water Infrastructure Driving Efficiencies RISER: XEC-ENGINEERED ACCESS FOR WATER REUSE SALTWATER DISPOSAL (SWD) Own & operate the system Improves operating costs System redundancy reduces downtime System expanding efficiently with additional development SWD INFRASTRUCTURE WOLFCAMP FRAC WATER RECYCLED PURCHASED WATER REUSE DRIVES EFFICIENCY On-demand recycled water lowers cost Wolfcamp completions used 97% recycled water in 2018 Saved $1.54/bbl for procured water XEC ACREAGE INFRASTRUCTURE OPERATED SWD 87% 97% ENVIRONMENTAL BENEFITS Avoids surface storage of produced water Permanent underground flow helps to prevent spills Reduces need for fresh water 32% 2016 2017 2018 CULBERSON: WATER INFRASTRUCTURE DRIVING EFFICIENCIES 14
CUMULATIVE OIL PRODUCTION (MBBL) Culberson: Resilient Long Lateral Returns FRAC GENERATIONS INCREASING PRODUCTIVITY UPPER WOLFCAMP BTAX IRR * 700 GEN 1 GEN 2 GEN 3 GEN 4 250% $1/Mcf $2/Mcf 600 500 200% 400 150% 300 100% 200 100 50% 0 0 200 400 600 800 1,000 1,200 1,400 0% $30 $40 $50 $60 $70 DAYS ON PRODUCTION NYMEX OIL PRICE PAYOUT IN ~15 MONTHS AT $50 OIL * BASIN-LOW LOE INVESTMENT OPPORTUNITY HAS TRIPLED SINCE 2016 *Assumes NYMEX oil pricing, realized gas pricing, NGL price is 30% of oil price assumes full NGL recovery CULBERSON: RESILIENT LONG LATERAL RETURNS 15
Delaware Basin Lea County, NM 31,384 NET ACRES VACA DRAW 5 WELLS TARGETING: Upper Wolfcamp Avalon Bone Spring TRISTE DRAW (AVALON) 6 wells tested 20 wells/section, producing ONE DEVELOPMENT ON PRODUCTION IN 2019 NEW MEXICO TEXAS CIMAREX ACREAGE UPPER WOLFCAMP AVALON BONE SPRING DELAWARE BASIN LEA COUNTY, NM 16
Mid-Continent Overview OKLAHOMA BILLY 2 WELLS WORT 3 WELLS MISS MARY 5 WELLS 326,000 NET ACRES WOODFORD: 135,625 NET UNDEVELOPED ACRES (HBP) MERAMEC: 116,500 NET ACRES Three developments on production in 2019 15% OF 2019 D&C CAPITAL CIMAREX ACREAGE MERAMEC OUTLINE WOODFORD OUTLINE MID-CONTINENT OVERVIEW 17
Disciplined Financial Positioning XEC DEBT/TTM EBITDA 3.0x DEBT/TTM EBITDA AVERAGE 2.5x 2.0x 1.5x 1.0x 0.5x SIGNIFICANT LIQUIDITY $2.1 billion of liquidity, including $801mm of cash (12/31/2018) CONSERVATIVE LEVERAGE 0.9x Debt/TTM EBITDA (12/31/18) INVESTMENT GRADE DEBT $500 million 4.375% senior unsecured notes due in 2029 $750 million 3.900% senior unsecured notes due in 2027 $750 million 4.375% senior unsecured notes due in 2024 0.0x 2010 2011 2012 2013 2014 2015 2016 2017 2018 DISCIPLINED FINANCIAL POSITIONING 18
$/BOE OPEX & CASH MARGIN MARGIN % Cash Operating Margin Expansion DECLINING CASH COSTS AND INCREASED REALIZED PRICES DRIVING MARGIN EXPANSION $50 80% $40 68% 65% 70% 70% $30 55% 54% 60% $20 50% $10 40% $14.2 $10.7 $9.5 $9.6 $8.6 $0 2014 2015 2016 2017 2018 CASH OPERATING COSTS MARGIN MARGIN % 30% Cash operating costs include: LOE, Transportation, Production Tax, G&A; Realized prices exclude hedge gain/loss CASH OPERATING MARGIN EXPANSION 19
Hitting Our Stride: Generating Free Cash Flow * CUMULATIVE FREE CASH FLOW ($MM) 2016-2018A 2019-2021E $600 $600 CUMULATIVE FREE CASH FLOW: 19-21E: $100-$600 MM 16-18A: $532 MM outspend $400 AVERAGE ANNUAL OIL GROWTH: 19-21E: 15% 16-18A: 11% $200 $0 $53 WTI $100 $50 WTI $55 WTI AVERAGE ANNUAL TOTAL CAPITAL * : 19-21E: $1.50 billion 16-18A: $1.25 billion ($200) ($400) ($600) ($532) PERFORMANCE DRIVERS: Consistent development program enhancing efficiencies Increasing well productivity Leveraging infrastructure Lowering production and capital costs *Free Cash Flow = Cash Flow - Total Capital Dividend (Annual $0.80); Total Capital = Total E&D + Midstream + Other HITTING OUR STRIDE: GENERATING FREE CASH FLOW * 20
Cimarex Energy Overview PROVEN TRACK RECORD PREMIER PORTFOLIO ENDURING CULTURE STRONG FINANCIAL POSITION CREATING VALUE AND GENERATING TOP-TIER RETURNS CORE POSITIONS IN THE PERMIAN AND ANADARKO BASINS MAXIMIZING FULL- CYCLE RETURN ON INVESTED CAPITAL LOW LEVERAGE AND LIQUIDITY PROVIDES OPPORTUNITIES CIMAREX ENERGY OVERVIEW 21
APPENDIX APPENDIX 22
2019 Guidance 1Q19E FY19E Production (MBOE/d) 245-257 250-270 Oil Production (MBO/d) 75-81 78-88 Capital Expenditures ($billion) E & D $1.35 1.45 D & C $1.1 1.2 Midstream/Other $0.06 0.07 Expenses ($/BOE) Production $3.20 3.70 Transportation, processing & other $2.30 2.90 DD&A and ARO accretion $7.75 8.75 General and administrative $1.00 1.30 Taxes other than income (% of oil and gas revenue) 5.5 6.5% 2019 GUIDANCE 23
Hedges as of February 20, 2019 OIL WTI Oil Collars 1 2019 2020 1Q 2Q 3Q 4Q 1Q 2Q Volume (Bbl/d) 31,689 33,000 26,000 18,000 10,000 2,000 Weighted Average Floor 53.85 53.70 55.23 57.56 58.00 50.00 Weighted Average Ceiling 66.79 66.62 69.46 70.90 73.20 62.60 WTI Swaps 2 Volume (Bbl/d) 29,000 29,000 24,000 16,000 7,000 7,000 Weighted Average Differential 3 (5.46) (5.46) (6.50) (7.79) (0.40) (0.40) GAS PEPL Collars 4 Volume (MMBtu/d) 139,667 150,000 120,000 90,000 60,000 30,000 Weighted Average Floor 2.04 2.03 1.94 1.94 1.96 1.95 Weighted Average Ceiling 2.40 2.39 2.32 2.37 2.38 2.26 El Paso Perm Collars 5 Volume (MMBtu/d) 86,556 90,000 70,000 40,000 20,000 10,000 Weighted Average Floor 1.67 1.67 1.49 1.40 1.45 1.50 Weighted Average Ceiling 1.94 1.95 1.79 1.73 1.92 2.13 Waha Collars 6 Volume (MMBtu/d) 36,556 40,000 40,000 40,000 30,000 10,000 Weighted Average Floor 1.40 1.41 1.41 1.41 1.43 1.50 Weighted Average Ceiling 1.71 1.73 1.73 1.73 1.79 1.90 Total Natural Gas Collars Volume (MMBtu/d) 262,779 280,000 230,000 170,000 110,000 50,000 Notes: 1 WTI refers to West Texas Intermediate oil prices as quoted on the New York Mercantile Exchange 4 PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent as quoted on Platt s Inside FERC 2 Index price on basis swaps is WTI Midland as quoted by Argus Americas Crude 5 El Paso Perm refers to El Paso Permian Basin index as quoted on Platt s Inside FERC 3 Index price on basis swaps is WTI NYMEX less weighted average differential shown in table 6 Waha refers to West Texas Natural Gas Index ( Waha ) as quoted in Platt s Inside FERC. HEDGES AS OF FEBRUARY 20, 2019 24
2019 Net Wells Online 2019 ACTIVITY: 83 NET WELLS (AVERAGE OPERATED LATERAL LENGTH: 9,050 ) 33 34 23 20 6 1QE 2QE 3QE 4QE WELLS WAITING ON COMPLETION AT 12/31/19 PERMIAN BASIN MID-CONTINENT 2019 NET WELLS ONLINE 25
CULBERSON REEVES EDDY LEA 2019 Delaware Basin Plans TOTAL D&C CAPITAL WELLS DRILLED BY COUNTY AVERAGE LATERAL LENGTH BY COUNTY 10,000 WOLFCAMP EDDY REEVES 8,000 6,000 $935 $1,020MM LEA 66 NET WELLS 4,000 2,000 CULBERSON 0 BONE SPRING AVALON 2019 DELAWARE BASIN PLANS 26
Permian Basin Water Management OWN AND OPERATE SALT WATER DISPOSAL (SWD) SYSTEMS IN CULBERSON, EDDY AND REEVES Improves operating costs RECYCLING PRODUCED WATER FOR COMPLETION OPERATIONS 53% of total water procured in 2018 was recycled Cost savings of ~$1.20/bbl of water CULBERSON WOLFCAMP WELLS USE 97% RECYCLED WATER FOR COMPLETIONS; REEVES WOLFCAMP WELLS USE 48% SECURED SWD AGREEMENTS IN LEA COUNTY PERMIAN BASIN WATER MANAGEMENT 27
Permian Basin Takeaway SALES AGREEMENTS IN PLACE FOR OIL VOLUMES THROUGH 2019 ~80% of oil production on pipe STRATEGIC PARTNERSHIPS IN CORE AREAS Pipelines in place Purchase obligations Midland index pricing GAS SALES AGREEMENTS IN PLACE 97% of forecasted production through 2019 El Paso or Waha index pricing CIMAREX ACREAGE PLAINS PIPELINE PLAINS PIPELINE (UNDER CONSTRUCTION) ENERGY TRANSFER PIPELINE EAGLECLAW OFFLOADING SITE OWN AND OPERATE TWO GAS GATHERING SYSTEMS Triple Crown Culberson/Eddy Counties Matterhorn Reeves County Connected to multiple gas processors with inter- and intrastate outlets Long-term sales agreements in place for NGL volumes PERMIAN BASIN TAKEAWAY 28
2018 Growth in Production and Reserves PROVED RESERVES (MMBOE) DAILY PRODUCTION (MBOE) 600 559 591 250 222 482 200 190 161 150 300 100 50 0 2016 2017 2018 0 2016 2017 2018 OIL NGL NATURAL GAS OIL NGL NATURAL GAS YE18 PROVED RESERVES: 591 MMBOE Increase of 6% Y/Y PDP now 85% of total proved Reserve replacement of 168% of 2018 production OIL/BOE GROWTH OF 18%/17% Y/Y Pro Forma Ward sale, Oil/BOE growth of 24%/19% TOTAL E&D CAPITAL $1.57 BILLION D&C capital of $1.34 billion 122 net wells brought online 2018 GROWTH IN PRODUCTION AND RESERVES 29
Non-GAAP Reconciliation ($ in Millions) 2015 2016 2017 2018 Net income (loss) $ (2,580) $ (409) $ 494 $ 792 Income tax expense (benefit) (1,472) (214) 188 231 Interest expense, net of capitalized 55 62 52 47 DD&A and ARO accretion 741 400 462 598 EBITDA (3,256) (161) 1,196 1,668 Impairment of oil and gas 4,033 758 Adjusted EBITDA 778 597 1,196 1,668 2016 2017 2018 Basic shares outstanding (in 000s) 95,124 95,437 95,756 Debt adjusted shares outstanding YE Debt, net 847,124 1,099,466 699,334 TTM stock price 115.07 114.00 93.77 Equivalent shares issued using TTM stock price 7,362 9,644 7,458 Debt adjusted shares using TTM stock price 102,485 105,082 103,214 1 The above table provides a reconciliation from generally accepted accounting principles (GAAP) net income (loss) to non-gaap EBITDA and non-gaap adjusted EBITDA, which excludes ceiling test impairments NON-GAAP RECONCILIATION 30
Non-GAAP Reconciliation Twelve Months Ended December 31, ($ in Millions) 2017 2018 ($ in Millions) Dec 31, 2018 Long-term debt (principal) 1,500 Net cash provided by operating activities $ 1,097 $ 1,551 Stockholders equity 3,330 Change in operating assets and liabilities 89 (17) Total capitalization 4,830 Adjusted cash flow from operations $ 1,186 $ 1,534 Long-term debt/total capitalization 31% 2018 Additions to proved reserves (MMBOE) Revisions of previous estimates (22.7) Extensions & discoveries 158.5 Purchase of reserves Total Additions (all sources) 135.8 Twelve Months Ended December 31, ($ in Millions) 2016 2017 2018 Long-term debt (principal) $1,500 $1,500 $1,500 Total Capital ($MM) $ 1,570 F&D Costs (all sources) ($/BOE) $ 11.56 Drilling F&D cost (extensions & discoveries) ($/BOE) $ 9.91 Adjusted EBITDA 597 1,196 1,668 Debt/Adjusted EBITDA 2.5x 1.3x 0.9x 1 Management uses the non-gaap measure of adjusted cash flow from operations as a means of measuring the company's ability to fund its capital program and dividends, without fluctuations caused by changes in current assets and liabilities, which are included in the GAAP measure of cash flow from operating activities. Management believes this non-gaap measure provides useful information to investors for the same reasons, and that it is also used by professional research analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry. NON-GAAP RECONCILIATION 31