PR Newswire | Aug 5, 2021 07:01AM EDT

08/05 06:00 CDT

Cimarex Energy Co. Reports Second-Quarter 2021 Results DENVER, Aug. 5, 2021

DENVER, Aug. 5, 2021 /PRNewswire/ -- Cimarex Energy Co. (NYSE: XEC) today reported second-quarter 2021 financial and operating results. Net income for second-quarter 2021 totaled $113.4 million, or $1.10 per share. Net income for the quarter was impacted by a mark-to-market loss on the Company's commodity derivative positions of $125.7 million. Excluding the impact of the mark-to-market loss on commodity derivatives, adjusted net income (non-GAAP) for second-quarter 2021 was $215.6 million, or $2.09 per share.

Highlights

* Generated cash flow from operating activities of $364 million. * Adjusted cash flow from operating activities (non-GAAP) totaled $394 million, exceeding capital expenditures and generating $195 million of free cash flow (non-GAAP). * Delivered oil volumes of 72.7 MBopd. * Provided comprehensive environmental and safety performance data for 2020 on Cimarex's website; data highlights the Company's continued investment and progress in reducing emissions, decreasing water intensity and enhancing safety efforts. * Announced merger with Cabot Oil & Gas, creating a premier energy company that will be well positioned to deliver through-cycle returns on and of capital.

Outlook

* Re-affirm Cimarex's full-year 2021 total capital expenditures guidance range of $650 million to $750 million, which is expected to drive fourth-quarter 2021 oil volume growth of more than 30% year-over-year.

See "Supplemental Non-GAAP Financial Measures" below for descriptions of the above non-GAAP measures as well as reconciliations of these measures to the associated GAAP measures.

Tom Jorden, Chairman and Chief Executive Officer, commented, "Our team delivered solid results, with oil production at the high-end of our expectations and cumulative free cash flow generation of $426 million in the first half of 2021. Additionally, we continued to make important progress on our ESG initiatives and minimizing our environmental footprint, including continuing to reduce our total Scope 1 GHG emissions."

"Looking ahead, the merits of our merger with Cabot are clear and compelling. The combination brings together two world-class portfolios to form a stronger, more resilient company that is well positioned to deliver value for shareholders. The transaction is proceeding on track, and we expect to close in the fourth quarter of this year."

Second-Quarter 2021 Summary

Second-quarter 2021 oil production totaled 72.7 thousand barrels per day (MBopd). Total production for the quarter averaged 237.1 thousand barrels of oil equivalent per day (MBoepd).

Cimarex's average realized price for oil, natural gas and NGLs for second-quarter 2021, excluding the effect of commodity derivatives, was $32.38 per Boe, compared with $10.32 per Boe for the same period a year ago.

Generated Strong Cash Flow

For second-quarter 2021, cash flow from operating activities was $363.7 million, including $30.4 million in working capital changes. Adjusted cash flow from operating activities (non-GAAP) was $394.0 million, exceeding second-quarter 2021 capital expenditures of $198.8 million, which included $168.4 million for drilling and completion activity. Free cash flow (non-GAAP) for second-quarter 2021 totaled $195.3 million.

During second-quarter 2021, Cimarex closed its previously announced agreements to sell non-core assets in the Permian Basin and Mid-Continent for a combined total of approximately $115 million. The divestitures include more than 3,000 gross wells in aggregate producing approximately 0.9 MBopd. There is no update to the Company's guidance as a result of these transactions.

Strong Financial Position

Cimarex maintains a strong financial position with substantial liquidity and investment-grade credit ratings. At the end of the reporting period, Cimarex had long-term debt of $2 billion, with no outstanding debt maturities until June 2024 and no debt outstanding under its credit facility. Driven by strong cash flow generation in second-quarter 2021, Cimarex's cash balance increased to $799 million at quarter end, compared to $273 million at December 31, 2020.

Hedge Position

Cimarex's commodity derivatives strategy mitigates the Company's exposure to commodity price fluctuations. Please see the table under "Derivatives Information" below for detailed information about Cimarex's current derivatives positions.

Outlook

Cimarex is currently running five rigs in the Permian Basin, and plans to average two completions crews during the second half of 2021. Cimarex maintains its previously-announced guidance range for 2021 capital expenditures of $650 million to $750 million, which is expected to result in fourth-quarter 2021 oil production growth guidance of more than 30%, as compared to fourth-quarter 2020.

ESG Performance Foundational To Cimarex's Success

The Company continues to drive towards consistently improving its environmental performance. In 2020, Cimarex reduced its greenhouse gas (GHG) emissions intensity by 22%, and is targeting an incremental reduction between 8% and 12% in 2021. The Company also recently published 2020 environmental and safety performance results.

Highlights include:

* 27% reduction in methane intensity rate, * 54% decline of our Permian Basin high-pressure flaring intensity, and * 73% recycled water utilization rate in Permian Basin completions operations.

Cimarex's full 2020 disclosures are available on the "Corporate Responsibility" section of our website.

Cabot Transaction Update

On May 24, 2021, Cimarex announced that it has entered into a definitive agreement whereby Cimarex will combine with Cabot Oil & Gas Corporation (NYSE: COG) in an all-stock merger. This transaction is expected to create a premier energy company with top-tier assets, more resilient free cash flow generation through cycles and a commitment to leading returns of capital, targeting returns of more than 50% of quarterly free cash flow, with the capacity and confidence to distribute more than 30% of cash flow from operations at all but the lowest commodity price levels. The completion of the transaction, which is expected to occur fourth-quarter 2021, remains subject to the approval of Cimarex and Cabot stockholders and the satisfaction of other customary closing conditions.

Second-Quarter 2021 Conference Call

Cimarex will host a conference call today, August 5, 2021 at 9:00 AM MT (11:00 AM ET) to discuss second-quarter 2021 financial and operational results.

Conference Call Information

Date: Thursday, August 5, 2021Time: 11:00 AM ET / 9:00 AM MTDial-in (for callers in the U.S.): (866) 367-3053Dial-in (for callers in Canada): (855) 669-9657International dial-in: (412) 902-4216

The live audio webcast and related earnings presentation can be accessed on the "Events & Presentations" page under the "Investor Relations" section of the Company's website at www.cimarex.com. The webcast will be archived and available at the same location after the conclusion of the live event.

About Cimarex Energy

Denver-based Cimarex Energy Co. is an independent oil and gas exploration and production Company with principal operations in the Permian Basin and Mid-Continent areas of the U.S. For more information about Cimarex, visit www.cimarex.com.

Cautionary Statement Regarding Forward-Looking Information

This communication contains certain forward-looking statements within the meaning of federal securities laws. Words such as anticipates, believes, expects, intends, plans, outlook, will, should, may and similar expressions may be used to identify forward-looking statements. Forward-looking statements are not statements of historical fact and reflect Cabot's and Cimarex's current views about future events. Such forward-looking statements include, but are not limited to, statements about the benefits of the proposed merger involving Cabot and Cimarex, including future financial and operating results? Cabot's and Cimarex's plans, objectives, expectations and intentions? the expected timing and likelihood of completion of the transaction? the expected timing and amount of any future dividends? and other statements that are not historical facts, including estimates of oil and natural gas reserves and resources, estimates of future production, assumptions regarding future oil and natural gas pricing, planned drilling activity, future results of operations, projected cash flow and liquidity, the achievement of synergies, business strategy and other plans and objectives for future operations. No assurances can be given that the forward-looking statements contained in this communication will occur as projected and actual results may differ materially from those projected. Forward-looking statements are based on current expectations, estimates and assumptions that involve a number of risks and uncertainties that could cause actual results to differ materially from those projected. These risks and uncertainties include, without limitation, the ability to obtain the requisite Cabot and Cimarex stockholder approvals? the risk that an event, change or other circumstances could give rise to the termination of the proposed merger? the risk that a condition to closing of the merger may not be satisfied on a timely basis or at all? the length of time necessary to close the proposed transaction, which may be longer than anticipated for various reasons? the risk that the businesses will not be integrated successfully? the risk that the cost savings and any other synergies from the transaction may not be fully realized or may take longer to realize than expected? the risk that any announcement relating to the proposed transaction could have adverse effects on the market price of Cabot's common stock or Cimarex's common stock? the risk of litigation related to the proposed transaction? the effect of future regulatory or legislative actions on the companies or the industry in which they operate, including the risk of new restrictions with respect to well spacing, hydraulic fracturing, natural gas flaring or other oil and natural gas development activities? the risk that the credit ratings of the combined business may be different from what the companies expect? disruption from the transaction making it more difficult to maintain relationships with customers, employees or suppliers? the diversion of management time on merger-related issues? the volatility in commodity prices for crude oil and natural gas? the continuing effects of the COVID-19 pandemic and the impact thereof on Cabot's and Cimarex's businesses, financial condition and results of operations? actions by, or disputes among or between, the Organization of Petroleum Exporting Countries and other producer countries? the presence or recoverability of estimated reserves? the ability to replace reserves? environmental risks? drilling and operating risks? exploration and development risks? competition? the ability of management to execute its plans to meet its goals? and other risks inherent in Cabot's and Cimarex's businesses. In addition, the declaration and payment of any future dividends, whether regular base quarterly dividends, variable dividends or special dividends following completion of the proposed transaction, will depend on the combined business financial results, cash requirements, future prospects and other factors deemed relevant by the board of directors of Cabot (as then constituted). These risks, as well as other risks related to the proposed transaction, are described in the registration statement on Form S-4 and preliminary joint proxy statement/prospectus that was filed with the SEC and the definitive joint proxy statement/prospectus if and when it becomes available in connection with the proposed transaction. While the list of factors presented here is, and the list of factors to be presented in the registration statement on Form S-4 are, considered representative, no such list should be considered to be a complete statement of all potential risks and uncertainties. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual outcomes may vary materially from those indicated. For additional information about other factors that could cause actual results to differ materially from those described in the forward-looking statements, please refer to: (1) Cabot's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, which are available on Cabot's website at www.cabotog.com/investorrelations and on the SECs website at http://www.sec.gov? and (2) Cimarex's annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, which are available on its website at www.cimarex.com/investor-relations and on the SECs website at http://www.sec.gov.

Forward-looking statements are based on the estimates and opinions of management at the time the statements are made. Except to the extent required by applicable law, neither Cabot nor Cimarex undertakes any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Readers are cautioned not to place undue reliance on these forward-looking statements that speak only as of the date hereof.

No Offer or Solicitation

This communication is not intended to and shall not constitute an offer to buy or sell or the solicitation of an offer to buy or sell any securities, or a solicitation of any vote or approval, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made, except by means of a prospectus meeting the requirements of Section 10 of the U.S. Securities Act of 1933, as amended.

Additional Information about the Merger and Where to Find It

In connection with the proposed transaction, Cabot filed with the SEC a registration statement on Form S-4 on June 29, 2021, that includes a preliminary joint proxy statement of Cabot and Cimarex and that also constitutes a preliminary prospectus of Cabot. If and when the registration statement becomes effective and the joint proxy statement/prospectus is in definitive form, such joint proxy statement/prospectus will be sent to the stockholders of Cabot and Cimarex. Each of Cabot and Cimarex also intends to file other relevant documents with the SEC regarding the proposed transaction, including the definitive joint proxy statement/prospectus. The information in the preliminary joint proxy statement/prospectus is not complete and may be changed. This communication is not a substitute for the preliminary joint proxy statement/prospectus or registration statement or any other document that Cabot or Cimarex may file with the SEC. The definitive joint proxy statement/prospectus (if and when available) will be mailed to stockholders of Cabot and Cimarex. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE REGISTRATION STATEMENT, THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS, THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS IF AND WHEN IT BECOMES AVAILABLE AND ANY OTHER RELEVANT DOCUMENTS THAT MAY BE FILED WITH THE SEC, AS WELL AS ANY AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, CAREFULLY AND IN THEIR ENTIRETY BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT CABOT, CIMAREX AND THE PROPOSED TRANSACTION. Investors and security holders are able to obtain free copies of the registration statement and preliminary joint proxy statement/prospectus and all other documents containing important information about Cabot, Cimarex and the proposed transaction, once such documents are filed with the SEC, including the definitive joint proxy statement/prospectus if and when it becomes available, through the website maintained by the SEC at http://www.sec.gov. Copies of the documents filed with the SEC by Cabot may be obtained free of charge on Cabot's website at www.cabotog.com/investor-relations or by contacting Matt Kerin by email at matt.kerin@cabotog.com or by phone at 281-589-4642. Copies of the documents filed with the SEC by Cimarex may be obtained free of charge on Cimarex's website at www.cimarex.com/investor-relations.

Participants in the Solicitation

Cabot, Cimarex and certain of their respective directors and executive officers may be deemed to be participants in the solicitation of proxies in respect of the proposed transaction. Information about the directors and executive officers of Cabot, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in Cabot's proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the SEC on March 12, 2021, and Cabot's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 26, 2021. Information about the directors and executive officers of Cimarex, including a description of their direct or indirect interests, by security holdings or otherwise, is set forth in Cimarex's proxy statement for its 2021 Annual Meeting of Stockholders, which was filed with the SEC on March 26, 2021, and Cimarex's Annual Report on Form 10-K for the fiscal year ended December 31, 2020, which was filed with the SEC on February 23, 2021. Investors may obtain additional information regarding the interests of those persons and other persons who may be deemed participants in the proposed transaction by reading the preliminary joint proxy statement/prospectus, including any amendments thereto, as well as the definitive joint proxy statement/prospectus if and when it becomes available and other relevant materials to be filed with the SEC regarding the proposed transaction when such materials become available. Investors should read the preliminary joint proxy statement/prospectus, and the definitive joint proxy statement/prospectus if and when it becomes available, carefully before making any voting or investment decisions. You may obtain free copies of these documents from Cabot or Cimarex using the sources indicated above.

Operational Activity

The tables below provide a summary of operational activity, production volumes and price realizations by region for second-quarter 2021:



Wells Brought on Production by Three Months Ended Six Months EndedRegion June 30, June 30,

2021 2020 2021 2020

Gross wells

Permian Basin 44 17 52 52

Mid-Continent 9 20 14 39

53 37 66 91

Net wells

Permian Basin 21.7 11.1 28.7 30.9

Mid-Continent 0.5 1.4 0.5 1.7

22.2 12.5 29.2 32.6

Three Months Ended Six Months EndedDaily Production Volumes by Region June 30, June 30,

2021 2020 2021 2020

Permian Basin

Gas (MMcf) 379.6 417.8 369.5 433.4

Oil (Bbls) 65,785 68,791 63,89474,198

NGL (Bbls) 46,408 47,291 42,78848,111

Total Equivalent (MBOE) 175.5 185.7 168.3 194.5



Mid-Continent

Gas (MMcf) 203.2 237.3 201.5 240.7

Oil (Bbls) 6,704 9,063 6,604 9,502

NGL (Bbls) 20,531 20,068 19,55621,089

Total Equivalent (MBOE) 61.1 68.7 59.7 70.7



Total Company

Gas (MMcf) 584.2 656.0 572.2 675.2

Oil (Bbls) 72,707 77,956 70,65683,873

NGL (Bbls) 67,030 67,402 62,41769,251

Total Equivalent (MBOE) 237.1 254.7 228.4 265.6

Average Realized Commodity Prices byThree Months EndedSix Months EndedRegion June 30, June 30,

2021 2020 2021 2020

Permian Basin

Gas ($ per Mcf) 2.36 0.62 3.15 0.35

Oil ($ per Bbl) 64.16 19.73 60.1532.84

NGL ($ per Bbl) 22.66 6.78 22.157.83



Mid-Continent

Gas ($ per Mcf) 2.78 1.40 3.58 1.39

Oil ($ per Bbl) 63.96 18.32 60.0031.83

NGL ($ per Bbl) 24.29 9.26 24.3210.71



Total Company

Gas ($ per Mcf) 2.51 0.91 3.30 0.72

Oil ($ per Bbl) 64.11 19.57 60.1232.74

NGL ($ per Bbl) 23.16 7.52 22.838.71

Derivatives Information

The table below summarizes the Company's outstanding derivative contracts as of August 5, 2021, for the periods indicated:



2021 2022

3Q 4Q Total 1Q 2Q 3Q 4Q Total

Gas Collars:

PEPL (1)

Volume (MMBtu/d) 90,000 90,000 90,000 80,000 40,000 20,000 20,000 39,781

Wtd Avg Floor $2.00 $2.00 $2.00 $2.25 $2.50 $2.60 $2.60 $2.40

Wtd Avg Ceiling $2.42 $2.42 $2.42 $2.73 $3.07 $3.27 $3.27 $2.95



El Paso Permian (1)

Volume (MMBtu/d) 70,000 70,000 70,000 60,000 40,000 20,000 20,000 34,849

Wtd Avg Floor $1.86 $1.86 $1.86 $2.25 $2.45 $2.50 $2.50 $2.38

Wtd Avg Ceiling $2.22 $2.22 $2.22 $2.74 $3.01 $3.15 $3.15 $2.93



Waha (1)

Volume (MMBtu/d) 100,000 100,000 100,000 90,000 50,000 30,000 20,000 47,260

Wtd Avg Floor $1.88 $1.88 $1.88 $2.14 $2.44 $2.47 $2.50 $2.31

Wtd Avg Ceiling $2.23 $2.23 $2.23 $2.59 $2.94 $3.00 $3.12 $2.80



Oil Collars:

WTI (2)

Volume (Bbl/d) 40,000 40,000 40,000 34,000 27,000 18,000 8,000 21,668

Wtd Avg Floor $34.65 $34.65 $34.65 $41.94 $43.74 $47.56$57.00$45.08

Wtd Avg Ceiling $44.37 $44.37 $44.37 $54.06 $56.34 $59.52$72.43$57.62



Oil Basis Swaps:

WTI Midland (3)

Volume (Bbl/d) 35,000 35,000 35,000 30,000 23,000 15,000 8,000 18,929

Wtd Avg Differential $(0.08)$(0.08)$(0.08)$0.20 $0.22 $0.20 $0.05 $0.19



Oil Roll Differential Swaps:

WTI (2)

Volume (Bbl/d) 18,000 18,000 18,000 18,000 11,000 7,000 - 8,945

Wtd Avg Price $(0.10)$(0.10)$(0.10)$(0.10)$(0.01)$0.10 $- $(0.03)

PEPL refers to Panhandle Eastern Pipe Line Tex/OK Mid-Continent index, El Paso1. Permian refers to El Paso Permian Basin index, and Waha refers to West Texas (Waha) Index, all as quoted in Platt's Inside FERC.

2. WTI refers to West Texas Intermediate oil price as quoted on the New York Mercantile Exchange.

Index price on basis swaps and oil roll differential swaps are WTI NYMEX less3. the weighted average WTI Midland differential, as quoted by Argus Americas Crude.

Condensed Consolidated Balance Sheets (unaudited)



June 30, December 31, 2020 2021

Assets (in thousands, except share and per share information)

Current assets:

Cash and cash equivalents $ 799,315 $ 273,145

Accounts receivable, net of allowance 474,170 332,485

Oil and gas well equipment and supplies 28,635 37,150

Derivative instruments 1,246 6,848

Other current assets 7,822 7,710

Total current assets 1,311,188 657,338

Oil and gas properties at cost, using the full cost method of accounting:

Proved properties 21,430,301 21,281,840

Unproved properties and properties under development, not being amortized 1,182,073 1,142,183

22,612,374 22,424,023

Less - accumulated depreciation, depletion, amortization, and impairment (19,176,876) (18,987,354)

Net oil and gas properties 3,435,498 3,436,669

Fixed assets, net of accumulated depreciation of $434,753 and $455,815, 384,216 436,101 respectively

Derivative instruments 2,458 2,342

Deferred income taxes - 20,472

Other assets 73,827 69,067

$ 5,207,187 $ 4,621,989

Liabilities, Redeemable Preferred Stock, and Stockholders' Equity

Current liabilities:

Accounts payable $ 79,350 $ 44,290

Accrued liabilities 347,488 280,849

Derivative instruments 366,591 145,398

Revenue payable 216,889 130,637

Operating leases 57,665 59,051

Total current liabilities 1,067,983 660,225

Long-term debt principal 2,000,000 2,000,000

Less-unamortized debt issuance costs and discounts (11,669) (12,701)

Long-term debt, net 1,988,331 1,987,299

Deferred income taxes 54,248 -

Derivative instruments 16,167 17,749

Operating leases 111,325 134,705

Other liabilities 176,299 231,776

Total liabilities 3,414,353 3,031,754

Redeemable preferred stock - 8.125% Series A Cumulative Perpetual Convertible 36,781 36,781 Preferred Stock, $0.01 par value, 28,165 shares authorized and issued



Stockholders' equity:

Common stock, $0.01 par value, 200,000,000 shares authorized, 102,820,006 and 1,028 1,029 102,866,806 shares issued, respectively

Additional paid-in capital 3,172,652 3,211,562

Accumulated deficit (1,417,627) (1,659,137)

Total stockholders' equity 1,756,053 1,553,454

$ 5,207,187 $ 4,621,989

Condensed Consolidated Statements of Operations (unaudited)



Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands, except per share information)

Revenues:

Oil sales $424,175$138,817 $768,879$499,797

Gas and NGL sales 274,554 100,261 599,952 198,742

Gas gathering and other 13,651 10,305 23,015 23,674

712,380 249,383 1,391,846722,213

Costs and expenses:

Impairment of oil and gas properties - 941,198 - 1,274,849



Depreciation, depletion, amortization, and accretion113,247 196,615 228,399 416,425

Impairment of goodwill - - - 714,447

Production 77,408 64,337 152,214 151,573

Transportation, processing, and other operating 59,285 53,282 122,892 108,204

Gas gathering and other 9,549 3,526 20,027 11,824

Taxes other than income 40,247 16,486 81,233 47,447

General and administrative 24,978 26,226 50,238 51,735

Stock compensation 7,878 6,747 16,427 13,141

Loss (gain) on derivative instruments, net 211,833 123,885 373,768 (103,055)

Other operating expense, net 8,050 130 7,117 381

552,475 1,432,432 1,052,3152,686,971



Operating income (loss) 159,905 (1,183,049)339,531 (1,964,758)



Other (income) and expense:

Interest expense 23,370 23,047 46,448 46,228

Capitalized interest (11,386) (12,939) (22,951) (26,121)

Other, net (459) 3,496 (598) 2,625



Income (loss) before income tax 148,380 (1,196,653)316,632 (1,987,490)

Income tax expense (benefit) 34,992 (271,506) 75,162 (288,061)

Net income (loss) $113,388$(925,147)$241,470$(1,699,429)



Earnings (loss) per share to common stockholders:

Basic $1.10 $(9.28) $2.35 $(17.05)

Diluted $1.10 $(9.28) $2.35 $(17.05)



Dividends declared per common share $0.27 $0.22 $0.54 $0.44



Weighted-average number of shares outstanding:

Basic 100,194 99,880 100,160 99,861

Diluted 100,285 99,880 100,228 99,861

Condensed Consolidated Statements of Cash Flows (unaudited)



Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands)

Cash flows from operating activities:

Net income (loss) $113,388$(925,147)$241,470$(1,699,429)

Adjustments to reconcile net income (loss) to net cash provided by operating activities:

Impairment of oil and gas properties - 941,198 - 1,274,849

Depreciation, depletion, amortization, and accretion113,247 196,615 228,399 416,425

Impairment of goodwill - - - 714,447

Deferred income taxes 34,550 (271,543) 74,720 (287,900)

Stock compensation 7,878 6,747 16,427 13,141

Loss (gain) on derivative instruments, net 211,833 123,885 373,768 (103,055)

Settlements on derivative instruments (86,136) 63,941 (148,670)107,055

Amortization of debt issuance costs and discounts 889 818 1,776 1,602

Changes in non-current assets and liabilities (4,910) 4,609 (5,654) 7,019

Other, net 3,291 3,405 6,966 6,795

Changes in operating assets and liabilities:

Accounts receivable (48,332) 85,010 (142,832)204,615

Other current assets (1,425) 1,519 (651) 1,495

Accounts payable and other current liabilities 19,399 (86,351) 120,865 (203,562)

Net cash provided by operating activities 363,672 144,706 766,584 453,497

Cash flows from investing activities:

Acquisition of oil and gas properties 2 - (308) (7,250)

Oil and gas capital expenditures (168,299)(152,510) (298,306)(411,330)

Other capital expenditures (2,275) (11,627) (5,806) (38,052)

Sales of oil and gas assets 113,634 - 118,669 830

Sales of other assets 221 1,007 606 1,188

Net cash used by investing activities (56,717) (163,130) (185,145)(454,614)

Cash flows from financing activities:

Borrowings of long-term debt - 60,000 - 161,000

Repayments of long-term debt - (60,000) - (161,000)

Financing fees - (1,457) (100) (1,557)

Finance lease payments (1,370) (1,343) (2,437) (2,808)

Dividends paid (28,161) (23,616) (51,210) (45,209)

Employee withholding taxes paid upon the net (2,191) (24) (2,191) (189) settlement of equity-classified stock awards

Proceeds from exercise of stock options 284 - 669 -

Net cash used by financing activities (31,438) (26,440) (55,269) (49,763)

Net change in cash and cash equivalents 275,517 (44,864) 526,170 (50,880)

Cash and cash equivalents at beginning of period 523,798 88,706 273,145 94,722

Cash and cash equivalents at end of period $799,315$43,842 $799,315$43,842

Supplemental Non-GAAP Financial Measures

(unaudited)

Reconciliation of Net Income (Loss) to Adjusted Net Income and AdjustedEarnings per Share

The Company's presentation of adjusted net income and adjusted earnings pershare that exclude the effect of certain items are non-GAAP financial measures.Adjusted net income and adjusted earnings per share represent earnings (loss)and diluted earnings (loss) per share determined under GAAP without regard tocertain non-cash and special items. The Company believes these measures provideuseful information to analysts and investors for analysis of its operatingresults on a recurring, comparable basis from period to period. Adjusted netincome and adjusted earnings per share should not be considered in isolation oras a substitute for earnings (loss) or diluted earnings (loss) per share asdetermined in accordance with GAAP and may not be comparable to other similarlytitled measures of other companies.

The following table provides a reconciliation from the GAAP measure of netincome (loss) to adjusted net income, both in total and on a per diluted sharebasis, for the periods indicated:

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands, except per share data)



Net income (loss) $113,388$(925,147)$241,470$(1,699,429)

Impairment of oil and gas properties - 941,198 - 1,274,849

Impairment of goodwill - - - 714,447

Merger related costs 8,059 - 8,059 -

Mark-to-market loss on open derivative positions125,697 187,826 225,098 4,000

Asset retirement obligation - - - 2,800

Tax impact (1) (31,566) (256,289) (55,258) (289,653)

Adjusted net income $215,578$(52,412) $419,369$7,014

Diluted earnings (loss) per share $1.10 $(9.28) $2.35 $(17.05)

Adjusted diluted earnings per share* $2.09 $(0.51) $4.08 $0.07



Weighted-average number of shares outstanding:

Adjusted diluted** 102,918 102,114 102,898 102,122

______________________________________

Because the goodwill impairment is not deductible for tax purposes, the tax(1) impact in the 2020 period is calculated using an effective tax rate determined by excluding goodwill from the effective tax rate calculation.

Adjusted net income and adjusted diluted earnings per share exclude the noteditems because management believes these items affect the comparability ofoperating results. The Company discloses these non-GAAP financial measures as auseful adjunct to GAAP measures because:

Management uses adjusted net income to evaluate the Company's operating a) performance between periods and to compare the Company's performance to other oil and gas exploration and production companies.

b) Adjusted net income is more comparable to earnings estimates provided by research analysts.

* Does not include adjustments resulting from application of the "two-classmethod" used to determine earnings per share under GAAP.

** Reflects the weighted-average number of common shares outstanding duringthe period as adjusted for the dilutive effects of outstanding stock options.

Reconciliation of Cash Flow from Operating Activities (CFO) to Adjusted CFO andto Free Cash Flow

The Company provides adjusted CFO, which is a non-GAAP financial measure.Adjusted CFO represents net cash provided by operating activities as determinedunder GAAP without regard to changes in operating assets and liabilities. TheCompany believes adjusted CFO is an accepted measure of an oil and natural gascompany's ability to generate cash to fund development and acquisitionactivities and service debt or pay dividends. Additionally, the Companyprovides free cash flow, which is a non-GAAP financial measure. Free cash flowis adjusted CFO in excess of oil and gas capital expenditures and other capitalexpenditures. The Company believes that free cash flow is useful to investorsas it provides a measure to compare both cash flow from operating activitiesand oil and gas capital expenditures across periods on a consistent basis.

These non-GAAP measures should not be considered as alternatives to, or moremeaningful than, net cash provided by operating activities as an indicator ofoperating performance.

The following table provides a reconciliation from the GAAP measure of net cashprovided by operating activities to adjusted CFO and to free cash flow as wellas free cash flow after dividend, for the periods indicated:

Three Months Ended Six Months Ended June 30, June 30,

2021 2020 2021 2020

(in thousands)

Net cash provided by operating activities $363,672$144,706$766,584$453,497

Total changes in cash due to changes in operating 30,358 (178) 22,618 (2,548) assets and liabilities (working capital):

Adjusted cash flow from operating activities 394,030 144,528 789,202 450,949



Oil and gas capital expenditures (168,299)(152,510)(298,306)(411,330)

Other capital expenditures (2,275) (11,627) (5,806) (38,052)

Change in capital accruals (23,162) 72,637 (44,866) 88,853

Capitalized stock compensation, inventory, and other(5,037) 7,815 (14,417) 2,613

Capital expenditures (198,773)(83,685) (363,395)(357,916)



Free cash flow 195,257 60,843 425,807 93,033

Dividends paid (28,161) (23,616) (51,210) (45,209)

Free cash flow after dividend $167,096$37,227 $374,597$47,824

Reconciliation of Long-Term Debt to Net Debt

The Company defines net debt as debt less cash and cash equivalents. Net debtshould not be considered as an alternative to, or more meaningful than, totaldebt, the most directly comparable GAAP measure. Management uses net debt todetermine the Company's outstanding debt obligations that would not be readilysatisfied by its cash and cash equivalents on hand. The Company believes thismetric is useful to analysts and investors in determining the Company'sleverage position because the Company has the ability to, and may decide to,use a portion of its cash and cash equivalents to reduce debt.

June 30, December 31, 2021 2020

(in thousands)

Long-term debt $2,000,000$2,000,000

Cash and cash equivalents(799,315) (273,145)

Net debt $1,200,685$1,726,855

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SOURCE Cimarex Energy Co.