000116805412/312021Q2FALSE00011680542021-01-012021-06-30xbrli:shares00011680542021-07-31iso4217:USD00011680542021-06-3000011680542020-12-31xbrli:pure00011680542020-01-012020-12-31iso4217:USDxbrli:shares0001168054xec:OilSalesMember2021-04-012021-06-300001168054xec:OilSalesMember2020-04-012020-06-300001168054xec:OilSalesMember2021-01-012021-06-300001168054xec:OilSalesMember2020-01-012020-06-300001168054xec:NaturalGasandNaturalGasLiquidsSalesMember2021-04-012021-06-300001168054xec:NaturalGasandNaturalGasLiquidsSalesMember2020-04-012020-06-300001168054xec:NaturalGasandNaturalGasLiquidsSalesMember2021-01-012021-06-300001168054xec:NaturalGasandNaturalGasLiquidsSalesMember2020-01-012020-06-300001168054xec:NaturalGasGatheringandOtherMember2021-04-012021-06-300001168054xec:NaturalGasGatheringandOtherMember2020-04-012020-06-300001168054xec:NaturalGasGatheringandOtherMember2021-01-012021-06-300001168054xec:NaturalGasGatheringandOtherMember2020-01-012020-06-300001168054xec:NaturalGasMarketingMember2021-04-012021-06-300001168054xec:NaturalGasMarketingMember2020-04-012020-06-300001168054xec:NaturalGasMarketingMember2021-01-012021-06-300001168054xec:NaturalGasMarketingMember2020-01-012020-06-3000011680542021-04-012021-06-3000011680542020-04-012020-06-3000011680542020-01-012020-06-3000011680542019-12-3100011680542020-06-300001168054us-gaap:CommonStockMember2020-12-310001168054us-gaap:AdditionalPaidInCapitalMember2020-12-310001168054us-gaap:RetainedEarningsMember2020-12-310001168054us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-310001168054us-gaap:RetainedEarningsMember2021-01-012021-03-3100011680542021-01-012021-03-310001168054us-gaap:CommonStockMember2021-01-012021-03-310001168054us-gaap:PreferredStockMember2021-01-012021-03-310001168054us-gaap:CommonStockMember2021-03-310001168054us-gaap:AdditionalPaidInCapitalMember2021-03-310001168054us-gaap:RetainedEarningsMember2021-03-3100011680542021-03-310001168054us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-300001168054us-gaap:RetainedEarningsMember2021-04-012021-06-300001168054us-gaap:CommonStockMember2021-04-012021-06-300001168054us-gaap:PreferredStockMember2021-04-012021-06-300001168054us-gaap:CommonStockMember2021-06-300001168054us-gaap:AdditionalPaidInCapitalMember2021-06-300001168054us-gaap:RetainedEarningsMember2021-06-300001168054us-gaap:CommonStockMember2019-12-310001168054us-gaap:AdditionalPaidInCapitalMember2019-12-310001168054us-gaap:RetainedEarningsMember2019-12-310001168054us-gaap:AdditionalPaidInCapitalMember2020-01-012020-03-310001168054us-gaap:RetainedEarningsMember2020-01-012020-03-3100011680542020-01-012020-03-310001168054us-gaap:CommonStockMember2020-01-012020-03-310001168054us-gaap:PreferredStockMember2020-01-012020-03-310001168054us-gaap:CommonStockMember2020-03-310001168054us-gaap:AdditionalPaidInCapitalMember2020-03-310001168054us-gaap:RetainedEarningsMember2020-03-3100011680542020-03-310001168054us-gaap:AdditionalPaidInCapitalMember2020-04-012020-06-300001168054us-gaap:RetainedEarningsMember2020-04-012020-06-300001168054us-gaap:CommonStockMember2020-04-012020-06-300001168054us-gaap:PreferredStockMember2020-04-012020-06-300001168054us-gaap:CommonStockMember2020-06-300001168054us-gaap:AdditionalPaidInCapitalMember2020-06-300001168054us-gaap:RetainedEarningsMember2020-06-300001168054srt:MinimumMember2021-01-012021-06-300001168054xec:A4.375Notesdue2024Memberus-gaap:SeniorNotesMember2021-06-300001168054xec:A4.375Notesdue2024Member2021-06-300001168054xec:A4.375Notesdue2024Member2020-12-310001168054xec:A3.90Notesdue2027Memberus-gaap:SeniorNotesMember2021-06-300001168054xec:A3.90Notesdue2027Member2021-06-300001168054xec:A3.90Notesdue2027Member2020-12-310001168054xec:A4.375Notesdue2029Memberus-gaap:SeniorNotesMember2021-06-300001168054xec:A4.375Notesdue2029Member2021-06-300001168054xec:A4.375Notesdue2029Member2020-12-310001168054xec:A3.90Notesdue2027Memberus-gaap:SeniorNotesMember2020-12-310001168054xec:A4.375Notesdue2029Memberus-gaap:SeniorNotesMember2020-12-310001168054us-gaap:RevolvingCreditFacilityMember2019-02-050001168054us-gaap:RevolvingCreditFacilityMember2021-06-300001168054us-gaap:LetterOfCreditMember2021-06-300001168054srt:MinimumMemberus-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMember2021-01-012021-06-300001168054us-gaap:RevolvingCreditFacilityMemberus-gaap:LondonInterbankOfferedRateLIBORMembersrt:MaximumMember2021-01-012021-06-300001168054us-gaap:BaseRateMembersrt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2021-01-012021-06-300001168054us-gaap:BaseRateMemberus-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-01-012021-06-300001168054srt:MinimumMemberus-gaap:RevolvingCreditFacilityMember2021-01-012021-06-300001168054us-gaap:RevolvingCreditFacilityMembersrt:MaximumMember2021-01-012021-06-300001168054us-gaap:RevolvingCreditFacilityMember2021-01-012021-06-300001168054us-gaap:RevolvingCreditFacilityMember2020-12-310001168054xec:A4.375Notesdue2029Memberus-gaap:SeniorNotesMember2019-03-080001168054xec:A4.375Notesdue2029Memberus-gaap:SeniorNotesMember2019-03-082019-03-080001168054xec:A3.90Notesdue2027Memberus-gaap:SeniorNotesMember2017-04-300001168054xec:A3.90Notesdue2027Memberus-gaap:SeniorNotesMember2017-04-012017-04-300001168054xec:A4.375Notesdue2024Memberus-gaap:SeniorNotesMember2014-09-30utr:bbl0001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year1Member2021-01-012021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Member2021-01-012021-06-300001168054xec:Year1Memberxec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-01-012021-06-30iso4217:USDutr:bbl0001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year1Member2021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Member2021-06-300001168054xec:Year1Memberxec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-01-012021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Member2021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Member2021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Member2021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-06-300001168054xec:DerivativeContractOilCollarWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Year2Member2021-06-30utr:MMBTU0001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMemberxec:Quarter3Year1Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-01-012021-06-300001168054xec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMember2021-01-012021-06-30iso4217:USDutr:MMBTU0001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMemberxec:Quarter3Year1Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-06-300001168054xec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter3Year1Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter4Year1Member2021-01-012021-06-300001168054xec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter3Year1Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter4Year1Member2021-06-300001168054xec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMember2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year1Member2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Member2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year1Member2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Member2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-01-012021-06-300001168054xec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMemberxec:Year2Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Memberxec:DerivativeContractGasCollarPEPLIndexMember2021-06-300001168054xec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPEPLIndexMemberxec:Year2Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter1Year2Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter2Year2Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter3Year2Member2021-01-012021-06-300001168054xec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Year2Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter1Year2Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter2Year2Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Quarter3Year2Member2021-06-300001168054xec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractGasCollarPermEPMemberxec:Year2Member2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Member2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Member2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Member2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Year2Member2021-01-012021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Member2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Member2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Member2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-06-300001168054xec:DerivativeContractGasCollarWahaMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Year2Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMemberxec:Quarter3Year1Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Memberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-01-012021-06-300001168054xec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMemberxec:Quarter3Year1Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Memberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-06-300001168054xec:Year1Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMemberxec:Quarter1Year2Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Memberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Memberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-01-012021-06-300001168054xec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMemberxec:Year2Member2021-01-012021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMemberxec:Quarter1Year2Member2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Memberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Memberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-06-300001168054xec:Quarter4Year2Memberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMember2021-06-300001168054xec:OutstandingDerivativeasofBalanceSheetDateMemberxec:DerivativeContractOilBasisSwapsWTIMidlandIndexMemberxec:Year2Member2021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year1Member2021-01-012021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Member2021-01-012021-06-300001168054xec:Year1Memberxec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-01-012021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year1Member2021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter4Year1Member2021-06-300001168054xec:Year1Memberxec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Member2021-01-012021-06-300001168054xec:Quarter4Year2Memberxec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-01-012021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Year2Member2021-01-012021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter1Year2Member2021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter2Year2Member2021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Quarter3Year2Member2021-06-300001168054xec:Quarter4Year2Memberxec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMember2021-06-300001168054xec:DerivativeContractOilRollDifferentialSwapsWTIIndexMemberxec:OutstandingDerivativeasofBalanceSheetDateMemberxec:Year2Member2021-06-300001168054xec:NaturalGasContractsMember2021-04-012021-06-300001168054xec:NaturalGasContractsMember2020-04-012020-06-300001168054xec:NaturalGasContractsMember2021-01-012021-06-300001168054xec:NaturalGasContractsMember2020-01-012020-06-300001168054xec:OilContractsMember2021-04-012021-06-300001168054xec:OilContractsMember2020-04-012020-06-300001168054xec:OilContractsMember2021-01-012021-06-300001168054xec:OilContractsMember2020-01-012020-06-300001168054xec:OilContractsMemberus-gaap:OtherCurrentAssetsMemberus-gaap:NondesignatedMember2021-06-300001168054xec:OilContractsMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:NondesignatedMember2021-06-300001168054xec:NaturalGasContractsMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:NondesignatedMember2021-06-300001168054us-gaap:OtherCurrentLiabilitiesMemberxec:OilContractsMemberus-gaap:NondesignatedMember2021-06-300001168054us-gaap:OtherCurrentLiabilitiesMemberxec:NaturalGasContractsMemberus-gaap:NondesignatedMember2021-06-300001168054xec:OilContractsMemberus-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:NondesignatedMember2021-06-300001168054xec:NaturalGasContractsMemberus-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:NondesignatedMember2021-06-300001168054us-gaap:NondesignatedMember2021-06-300001168054xec:OilContractsMemberus-gaap:OtherCurrentAssetsMemberus-gaap:NondesignatedMember2020-12-310001168054xec:NaturalGasContractsMemberus-gaap:OtherCurrentAssetsMemberus-gaap:NondesignatedMember2020-12-310001168054xec:NaturalGasContractsMemberus-gaap:OtherNoncurrentAssetsMemberus-gaap:NondesignatedMember2020-12-310001168054us-gaap:OtherCurrentLiabilitiesMemberxec:OilContractsMemberus-gaap:NondesignatedMember2020-12-310001168054us-gaap:OtherCurrentLiabilitiesMemberxec:NaturalGasContractsMemberus-gaap:NondesignatedMember2020-12-310001168054xec:OilContractsMemberus-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:NondesignatedMember2020-12-310001168054xec:NaturalGasContractsMemberus-gaap:OtherNoncurrentLiabilitiesMemberus-gaap:NondesignatedMember2020-12-310001168054us-gaap:NondesignatedMember2020-12-310001168054us-gaap:CarryingReportedAmountFairValueDisclosureMemberxec:A4.375Notesdue2024Member2021-06-300001168054us-gaap:EstimateOfFairValueFairValueDisclosureMemberxec:A4.375Notesdue2024Member2021-06-300001168054us-gaap:CarryingReportedAmountFairValueDisclosureMemberxec:A4.375Notesdue2024Member2020-12-310001168054us-gaap:EstimateOfFairValueFairValueDisclosureMemberxec:A4.375Notesdue2024Member2020-12-310001168054xec:A3.90Notesdue2027Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-06-300001168054xec:A3.90Notesdue2027Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-06-300001168054xec:A3.90Notesdue2027Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310001168054xec:A3.90Notesdue2027Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001168054xec:A4.375Notesdue2029Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2021-06-300001168054xec:A4.375Notesdue2029Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2021-06-300001168054xec:A4.375Notesdue2029Memberus-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310001168054xec:A4.375Notesdue2029Memberus-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001168054us-gaap:CarryingReportedAmountFairValueDisclosureMember2021-06-300001168054us-gaap:EstimateOfFairValueFairValueDisclosureMember2021-06-300001168054us-gaap:CarryingReportedAmountFairValueDisclosureMember2020-12-310001168054us-gaap:EstimateOfFairValueFairValueDisclosureMember2020-12-310001168054us-gaap:AllowanceForCreditLossMember2021-06-300001168054us-gaap:AllowanceForCreditLossMember2020-12-310001168054us-gaap:SeriesAPreferredStockMember2021-06-3000011680542021-05-012021-05-310001168054xec:PerformanceBasedRestrictedStockMember2021-04-012021-06-300001168054xec:PerformanceBasedRestrictedStockMember2020-04-012020-06-300001168054xec:PerformanceBasedRestrictedStockMember2021-01-012021-06-300001168054xec:PerformanceBasedRestrictedStockMember2020-01-012020-06-300001168054xec:ServiceBasedRestrictedStockMember2021-04-012021-06-300001168054xec:ServiceBasedRestrictedStockMember2020-04-012020-06-300001168054xec:ServiceBasedRestrictedStockMember2021-01-012021-06-300001168054xec:ServiceBasedRestrictedStockMember2020-01-012020-06-300001168054us-gaap:RestrictedStockMember2021-04-012021-06-300001168054us-gaap:RestrictedStockMember2020-04-012020-06-300001168054us-gaap:RestrictedStockMember2021-01-012021-06-300001168054us-gaap:RestrictedStockMember2020-01-012020-06-300001168054us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001168054us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001168054us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001168054us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001168054us-gaap:EmployeeStockOptionMember2021-04-012021-06-300001168054us-gaap:ConvertiblePreferredStockMember2021-04-012021-06-300001168054us-gaap:EmployeeStockOptionMember2020-04-012020-06-300001168054us-gaap:ConvertiblePreferredStockMember2020-04-012020-06-300001168054us-gaap:RestrictedStockMember2020-04-012020-06-300001168054us-gaap:EmployeeStockOptionMember2021-01-012021-06-300001168054us-gaap:ConvertiblePreferredStockMember2021-01-012021-06-300001168054us-gaap:EmployeeStockOptionMember2020-01-012020-06-300001168054us-gaap:ConvertiblePreferredStockMember2020-01-012020-06-300001168054us-gaap:RestrictedStockMember2020-01-012020-06-300001168054xec:OilRecoveryandMarginalWellCreditsMember2020-12-310001168054us-gaap:StateAndLocalJurisdictionMember2020-12-310001168054xec:DrillingCommitmentsMember2021-01-012021-06-300001168054xec:GatheringSystemConstructionMember2021-01-012021-06-30utr:Bcf0001168054xec:NaturalGasSalesContractsMember2021-06-300001168054xec:NaturalGasSalesContractsMember2021-01-012021-06-300001168054xec:GasGatheringandProcessingAgreementsMember2021-01-012021-06-300001168054xec:GasGatheringandProcessingAgreementsMember2021-06-300001168054xec:MinimumVolumeDeliveryCommitmentsMember2021-06-300001168054xec:FirmTransportationAgreementsMember2021-06-300001168054xec:MinimumVolumeWaterDeliveryCommitmentsMember2021-06-3000011680542021-05-310001168054srt:MinimumMember2021-05-310001168054srt:MaximumMember2021-05-310001168054xec:HelmerichPayneInc.Member2021-04-012021-06-300001168054xec:HelmerichPayneInc.Member2021-01-012021-06-300001168054xec:HelmerichPayneInc.Member2020-04-012020-06-300001168054xec:HelmerichPayneInc.Member2020-01-012020-06-300001168054xec:DoubleCMergerSubIncMember2021-05-230001168054xec:DoubleCMergerSubIncMember2021-05-230001168054xec:CabotOilGasCorporationMemberxec:DoubleCMergerSubIncMember2021-05-230001168054xec:WestTexasAndSouthernOklahomaMemberus-gaap:DisposalGroupDisposedOfBySaleNotDiscontinuedOperationsMember2021-04-012021-06-30

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.  20549
 
FORM 10-Q
(Mark One)
Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the Quarterly Period ended June 30, 2021
or
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
For the transition period from _______________ to _______________
 Commission File No. 001-31446
CIMAREX ENERGY CO.
(Exact name of registrant as specified in its charter)
Delaware   45-0466694
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. Employer
Identification No.)
 
1700 Lincoln Street, Suite 3700 Denver Colorado   80203
(Address of principal executive offices)   (Zip Code)
(303) 295-3995
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of each class   Trading Symbol(s) Name of each exchange on which registered
Common Stock ($0.01 par value)   XEC New York Stock Exchange

    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   No 

    Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes   No 

    Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer Accelerated filer Non-accelerated filer Smaller reporting company
Emerging growth company

    If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     

    Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
      Yes   No 

    The number of shares of Cimarex Energy Co. common stock outstanding as of July 31, 2021 was 102,813,233.


CIMAREX ENERGY CO.
Table of Contents
 
  Page
 
   
 
     
 
7
     
 
8
   
 
9
   
 
   
 
   
   
   
   
 
   
   
   



GLOSSARY

Bbls—Barrels (of oil or natural gas liquids)
Bcf—Billion cubic feet (of natural gas)
BOE—Barrels of oil equivalent
Gross Wells—The total wells in which a working interest is owned.
MBbls—Thousand barrels (of oil or natural gas liquids)
MBOE—Thousand barrels of oil equivalent
Mcf—Thousand cubic feet (of natural gas)
MMBtu—Million British thermal units
MMcf—Million cubic feet (of natural gas)
Net Wells—The sum of the fractional working interest owned in gross wells expressed in whole numbers and fractions of whole numbers.
NGL or NGLs—Natural gas liquids

Energy equivalent is determined using the ratio of one barrel of oil, condensate, or NGL to six Mcf of natural gas.

CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS

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 Exchange Act of 1934. In particular, in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, we provide projections of our 2021 capital expenditures. All statements, other than statements of historical facts, that address activities, events, outcomes, and other matters that Cimarex plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates, or anticipates (and other similar expressions) will, should, or may occur in the future are forward-looking statements. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Form 10-Q and our Form 10-K for the year ended December 31, 2020. Forward-looking statements include statements with respect to, among other things:

Fluctuations in the price we receive for our oil, gas, and NGL production, including local market price differentials, which may be exacerbated by the demand destruction resulting from the highly transmissible and pathogenic coronavirus known as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the disease known as COVID-19;

Disruptions to the availability of workers and contractors due to illness and stay-at-home orders related to the COVID-19 pandemic;

Cost and availability of gathering, pipeline, processing, refining, transportation and other midstream and downstream activities and our ability to sell oil, gas, and NGLs, which may be negatively impacted by the COVID-19 pandemic, severe weather, and other risks, and may lead to a lack of any available markets;

Availability of supply chains and critical equipment and supplies, which may be negatively impacted by the COVID-19 pandemic and other risks;

Higher than expected costs and expenses, including the availability and cost of services and materials, which may be negatively impacted by the COVID-19 pandemic and severe weather;

Compliance with environmental and other regulations, including new regulations that may result from the recent change in federal and state administrations and legislatures;

3

Legislative or regulatory changes, including initiatives related to hydraulic fracturing, emissions, and disposal of produced water, which may be negatively impacted by the recent change in Presidential administration or legislatures;

The ability to receive drilling and other permits or approvals and rights-of-way in a timely manner (or at all), which may be negatively impacted by the impact of COVID-19 restrictions on regulatory employees who process and approve permits, other approvals and rights-of-way and which may be restricted by new Presidential and Secretarial orders and regulation and legislation;

Reductions in the quantity of oil, gas, and NGLs sold and prices received because of decreased demand and/or curtailments in production relating to mechanical, transportation, processing, storage, capacity, marketing, weather, the COVID-19 pandemic, or other problems;

Declines in the SEC PV10 value of our oil and gas properties resulting in full cost ceiling test impairments to the carrying values of our oil and gas properties;

The effectiveness of our internal control over financial reporting;

Success of the company’s risk management activities;

Availability of financing and access to capital markets;

Estimates of proved reserves, exploitation potential, or exploration prospect size;

Greater than expected production decline rates;

Timing and amount of future production of oil, gas, and NGLs;

Cybersecurity threats, technology system failures, and data security issues;

The inability to transport, process, and store oil and gas;

Hedging activities and the viability of our hedging counterparties, many of whom have been negatively impacted by the COVID-19 pandemic;

Economic and competitive conditions;

Lack of or cost of available insurance;

Cash flow and anticipated liquidity;

Continuing compliance with the financial covenant contained in our amended and restated credit agreement;

The loss of certain federal income tax deductions;

Litigation;

Environmental liabilities;

New federal regulations regarding species or habitats;

Exploration and development opportunities that we pursue may not result in economic, productive oil and gas properties;
4

Drilling of wells;

Development drilling and testing results;

Performance of acquired properties and newly drilled wells;

Ability to obtain industry partners to jointly explore certain prospects, and the willingness and ability of those partners to meet capital obligations when requested;

The expected benefits associated with the announced transaction with Cabot and the ability to achieve those expected benefits;

Ability to successfully integrate our and Cabot’s businesses;

Ability to obtain the approvals of our and Cabot’s stockholders to consummate the announced transaction with Cabot;

Timing of the announced transaction with Cabot;

Unexpected future capital expenditures;

Amount, nature, and timing of capital expenditures;

Proving up undeveloped acreage and maintaining production on leases;

Unforeseen liabilities associated with acquisitions and dispositions;

Establishing valuation allowances against our deferred tax assets;

Potential payments for failing to meet minimum oil, gas, NGL, or water delivery or sales commitments;

Increased financing costs due to a significant increase in interest rates;

Risks associated with concentration of operations in one major geographic area;

Availability and cost of capital;

Title to properties;

Ability to complete property sales or other transactions; and

Other factors discussed in the company’s reports filed with the Securities and Exchange Commission (“SEC”).

We caution you that these forward-looking statements are subject to all of the risks and uncertainties, many of which are beyond our control, incident to the exploration for and development, production, and sale of oil, gas, and NGLs.

These risks include, but are not limited to, commodity price volatility, demand, capacity, inflation, lack of availability of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty inherent in estimating proved oil and gas reserves and in projecting future rates of production,
5

production type curves, well spacing, timing of development expenditures, and other risks described herein. Many of these risks can be exacerbated by epidemics and pandemics including the current COVID-19 pandemic.

Reservoir engineering is a subjective process of estimating underground accumulations of oil and gas that cannot be measured in an exact way. The accuracy of any reserve estimate depends on the quality of available data and the interpretation of such data by our engineers. As a result, estimates made by different engineers often vary from one another. In addition, the results of drilling, testing, and production activities may justify revisions of estimates that were made previously. If significant, such revisions could change the timing of future production and development drilling. Accordingly, reserve estimates are generally different from the quantities of oil and gas that are ultimately recovered.

Risk factors related to mergers and acquisitions, including our acquisition of Resolute Energy Corporation in 2019 and our proposed transaction with Cabot in 2021, include, among others: unknown liabilities related to the acquired properties or entities; the risk that problems may arise in successfully integrating the businesses of the companies, which may result in the combined company not operating as effectively and efficiently as expected; the risk that the combined company may be unable to achieve synergies or other anticipated benefits of the transaction; or it may take longer than expected to achieve those synergies or benefits, and other important factors, such as expenses related to integration, that could cause actual results to differ materially from those projected.

Should one or more of the risks or uncertainties described above or elsewhere in this Form 10-Q or in our Annual Report on Form 10-K for the year ended December 31, 2020 cause our underlying assumptions to be incorrect, our actual results and plans could differ materially from those expressed in any forward-looking statements.

All forward-looking statements, express or implied, included in this Form 10-Q and attributable to Cimarex are qualified in their entirety by this cautionary statement. This cautionary statement should also be considered in connection with any subsequent written or oral forward-looking statements that Cimarex or persons acting on its behalf may issue. Cimarex does not undertake any obligation to update any forward-looking statements to reflect events or circumstances after the date of filing this Form 10-Q with the SEC, except as required by law.

6

PART I
ITEM 1. Financial Statements
CIMAREX ENERGY CO.
Condensed Consolidated Balance Sheets
(in thousands, except share and per share information)
(Unaudited)
  June 30, December 31,
  2021 2020
Assets    
Current assets:    
Cash and cash equivalents $ 799,315  $ 273,145 
Accounts receivable, net of allowance:  
Trade 51,421  49,650 
Oil and gas sales 410,327  271,141 
Gas gathering, processing, and marketing 12,422  11,694 
Oil and gas well equipment and supplies 28,635  37,150 
Derivative instruments 1,246  6,848 
Prepaid expenses 6,823  7,113 
Other current assets 999  597 
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, respectively
384,216  436,101 
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:  
Trade $ 54,911  $ 21,902 
Gas gathering, processing, and marketing 24,439  22,388 
Accrued liabilities:  
Exploration and development 89,946  50,014 
Taxes other than income 40,896  29,051 
Other 216,646  201,784 
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  — 
Asset retirement obligation 119,553  165,595 
Derivative instruments 16,167  17,749 
Operating leases 111,325  134,705 
Other liabilities 56,746  66,181 
Total liabilities 3,414,353  3,031,754 
Commitments and contingencies (Note 10)
Redeemable preferred stock - 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, $0.01 par value, 28,165 shares authorized and issued (Note 5)
36,781  36,781 
Stockholders’ equity:    
Common stock, $0.01 par value, 200,000,000 shares authorized, 102,820,006 and 102,866,806 shares issued, respectively
1,028  1,029 
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 

See accompanying Notes to Condensed Consolidated Financial Statements.

7


CIMAREX ENERGY CO.
Condensed Consolidated Statements of Operations
(in thousands, except per share information)
(Unaudited)
  Three Months Ended
June 30,
Six Months Ended
June 30,
  2021 2020 2021 2020
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 13,530  11,589  25,745  25,172 
Gas marketing 121  (1,284) (2,730) (1,498)
  712,380  249,383  1,391,846  722,213 
Costs and expenses:        
Impairment of oil and gas properties —  941,198  —  1,274,849 
Depreciation, depletion, and amortization 110,733  194,954  223,667  410,040 
Asset retirement obligation 2,514  1,661  4,732  6,385 
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-based 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  1,052,315  2,686,971 
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)
 











See accompanying Notes to Condensed Consolidated Financial Statements.
8


CIMAREX ENERGY CO.
Condensed Consolidated Statements of Cash Flows
(in thousands)
(Unaudited)
  Six Months Ended
June 30,
  2021 2020
Cash flows from operating activities:    
Net income (loss) $ 241,470  $ (1,699,429)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:    
Impairment of oil and gas properties —  1,274,849 
Depreciation, depletion, and amortization 223,667  410,040 
Asset retirement obligation 4,732  6,385 
Impairment of goodwill —  714,447 
Deferred income taxes 74,720  (287,900)
Stock-based compensation 16,427  13,141 
Loss (gain) on derivative instruments, net 373,768  (103,055)
Settlements on derivative instruments (148,670) 107,055 
Amortization of debt issuance costs and discounts 1,776  1,602 
Changes in non-current assets and liabilities (5,654) 7,019 
Other, net 6,966  6,795 
Changes in operating assets and liabilities:    
Accounts receivable (142,832) 204,615 
Other current assets (651) 1,495 
Accounts payable and other current liabilities 120,865  (203,562)
Net cash provided by operating activities 766,584  453,497 
Cash flows from investing activities:    
Oil and gas capital expenditures (298,306) (411,330)
Acquisition of oil and gas properties (308) (7,250)
Other capital expenditures (5,806) (38,052)
Sales of oil and gas assets 118,669  830 
Sales of other assets 606  1,188 
Net cash used by investing activities (185,145) (454,614)
Cash flows from financing activities:    
Borrowings of long-term debt —  161,000 
Repayments of long-term debt —  (161,000)
Financing fees (100) (1,557)
Finance lease payments (2,437) (2,808)
Dividends paid (51,210) (45,209)
Employee withholding taxes paid upon the net settlement of equity-classified stock awards (2,191) (189)
Proceeds from exercise of stock options 669  — 
Net cash used by financing activities (55,269) (49,763)
Net change in cash and cash equivalents 526,170  (50,880)
Cash and cash equivalents at beginning of period 273,145  94,722 
Cash and cash equivalents at end of period $ 799,315  $ 43,842 
 



See accompanying Notes to Condensed Consolidated Financial Statements.
9


CIMAREX ENERGY CO.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
Additional
Paid-in Capital
Accumulated
Deficit
Total
Stockholders’
Equity
  Common Stock
  Shares Amount
Balance, December 31, 2020 102,867  $ 1,029  $ 3,211,562  $ (1,659,137) $ 1,553,454 
Dividends paid on stock awards subsequently forfeited —  —  14  32  46 
Dividends declared on common stock ($0.27 per share)
—  —  (27,845) —  (27,845)
Dividends declared on redeemable preferred stock ($20.3125 per share)
—  —  (572) —  (572)
Net income —  —  —  128,082  128,082 
Issuance of restricted stock awards 25  —  —  —  — 
Restricted stock forfeited and retired (73) (1) —  — 
Exercise of stock options —  385  —  385 
Stock-based compensation —  —  10,215  —  10,215 
Balance, March 31, 2021 102,828  $ 1,028  $ 3,193,760  $ (1,531,023) $ 1,663,765 
Dividends paid on stock awards subsequently forfeited —  —  15 
Dividends declared on common stock ($0.27 per share)
—  —  (27,855) —  (27,855)
Dividends declared on redeemable preferred stock ($20.3125 per share)
—  —  (572) —  (572)
Net income —  —  —  113,388  113,388 
Issuance of restricted stock awards 27  —  —  —  — 
Common stock reacquired and retired (32) —  (2,191) —  (2,191)
Restricted stock forfeited and retired (10) —  —  —  — 
Exercise of stock options —  284  —  284 
Stock-based compensation —  —  9,219  —  9,219 
Balance, June 30, 2021 102,820  $ 1,028  $ 3,172,652  $ (1,417,627) $ 1,756,053 























See accompanying Notes to Condensed Consolidated Financial Statements.
10


CIMAREX ENERGY CO.
Condensed Consolidated Statements of Stockholders’ Equity
(in thousands)
(Unaudited)
Additional
Paid-in Capital
Retained
Earnings
(Accumulated
Deficit)
Total
Stockholders’
Equity
  Common Stock
  Shares Amount
Balance, December 31, 2019 102,145  $ 1,021  $ 3,243,325  $ 331,795  $ 3,576,141 
Dividends paid on stock awards subsequently forfeited —  —  23  29 
Dividends declared on common stock ($0.22 per share)
—  —  —  (22,548) (22,548)
Dividends declared on redeemable preferred stock ($20.3125 per share)
—  —  —  (1,269) (1,269)
Net loss —  —  —  (774,282) (774,282)
Common stock reacquired and retired (12) —  (165) —  (165)
Restricted stock forfeited and retired (31) —  —  —  — 
Stock-based compensation —  —  11,594  —  11,594 
Balance, March 31, 2020 102,102  $ 1,021  $ 3,254,760  $ (466,281) $ 2,789,500 
Dividends paid on stock awards subsequently forfeited —  — 
Dividends declared on common stock ($0.22 per share)
—  —  (22,561) (22,559)
Dividends declared on redeemable preferred stock ($20.3125 per share)
—  —  (1,269) —  (1,269)
Net loss —  —  —  (925,147) (925,147)
Issuance of restricted stock awards 66  (1) —  — 
Common stock reacquired and retired (2) —  (24) —  (24)
Restricted stock forfeited and retired (15) —  —  —  — 
Stock-based compensation —  —  10,338  —  10,338 
Balance, June 30, 2020 102,151  $ 1,022  $ 3,241,244  $ (1,391,419) $ 1,850,847 

























See accompanying Notes to Condensed Consolidated Financial Statements.
11


CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)

1.BASIS OF PRESENTATION

Cimarex Energy Co. (“Cimarex,” “company,” “we,” or “us”), a Delaware corporation, is an independent oil and gas exploration and production company. Our operations are located entirely within the United States, mainly in Texas, New Mexico, and Oklahoma. The accompanying unaudited financial statements have been prepared pursuant to rules and regulations of the Securities and Exchange Commission (“SEC”). Accordingly, certain disclosures required by accounting principles generally accepted in the United States and normally included in Annual Reports on Form 10-K have been omitted. Although management believes that our disclosures in these interim financial statements are adequate, they should be read in conjunction with the financial statements, summary of significant accounting policies, and footnotes included in our Annual Report on Form 10-K for the year ended December 31, 2020.

In the opinion of management, the accompanying financial statements reflect all adjustments necessary to fairly present our financial position, results of operations, and cash flows for the periods and as of the dates shown. The accounts of Cimarex and its subsidiaries are presented in the accompanying financial statements, with intercompany balances and transactions eliminated in consolidation. Certain amounts in the prior year financial statements have been reclassified to conform to the 2021 financial statement presentation.

Use of Estimates

Areas of significance requiring the use of management’s judgments include the estimation of proved oil and gas reserves used in calculating depletion, the estimation of future net revenues used in computing ceiling test limitations, and the estimation of future abandonment obligations used in recording asset retirement obligations. Estimates and judgments also are required in determining allowances for credit losses, impairments of unproved properties and other assets, valuation of deferred tax assets, fair value measurements, lease liabilities, and contingencies. We analyze our estimates and base them 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.

Oil and Gas Well Equipment and Supplies

Our oil and gas well equipment and supplies are valued at the lower of cost and net realizable value, where net realizable value is based on estimated selling prices in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Declines in the price of oil and gas well equipment and supplies in future periods could cause us to recognize impairments on these assets. An impairment would not affect cash flow from operating activities, but would adversely affect our net income and stockholders’ equity.

Oil and Gas Properties

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. Under the full cost method of accounting, we are required to perform a quarterly ceiling test calculation to test our oil and gas properties for possible impairment. If the net capitalized cost of our oil and gas properties, as adjusted for income taxes, exceeds the ceiling limitation, the excess is charged to expense. The ceiling limitation is equal to the sum of: (i) the present value discounted at 10% of estimated future net revenues from proved reserves, (ii) the cost of properties not being amortized, and (iii) the lower of cost or estimated fair value of unproven properties included in the costs being amortized, as adjusted for income taxes. We currently do not have any unproven properties that are being amortized. Estimated future net revenues are determined based on trailing twelve-month average commodity prices and estimated proved reserve quantities, operating costs, and capital expenditures.

12

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
The quarterly ceiling test is primarily impacted by commodity prices, changes in estimated reserve quantities, overall exploration and development costs, and deferred taxes.  If pricing conditions decline, or if there is a negative impact on one or more of the other components of the calculation, we may incur a full cost ceiling test impairment. The calculated ceiling limitation is not intended to be indicative of the fair market value of our proved reserves or future results. Impairment charges do not affect cash flow from operating activities, but do adversely affect our net income and various components of our balance sheet.  Any impairment of oil and gas properties is not reversible at a later date. 

We did not incur a ceiling test impairment for the six months ended June 30, 2021. At June 30, 2021, a decline in the value of the ceiling limitation of approximately 34% or more would have resulted in an impairment. For the six months ended June 30, 2020, we incurred ceiling test impairments totaling $1.275 billion resulting primarily from the impact of decreases in the 12-month average trailing prices for oil, gas, and NGLs as well as significant basis differentials utilized in determining the estimated future net cash flows from proved reserves.

Goodwill

Goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired and is tested for impairment at least annually. During the three months ended March 31, 2020, the company’s market capitalization declined significantly, caused by macroeconomic and geopolitical conditions including the collapse of oil prices driven by surplus supply and decreased demand caused by the COVID-19 pandemic. In addition, the uncertainty related to oil demand significantly impacted our investment and operating decisions at the time. As a result of these events and circumstances, we performed an interim quantitative impairment test for goodwill as of March 31, 2020, which utilized quoted market prices for our common stock as a basis for determining the fair value of our reporting unit. Based upon this test, we concluded that goodwill was fully impaired at March 31, 2020. The following table reflects components of the change in the carrying amount of goodwill for the six months ended June 30, 2020 (subsequent to June 30, 2020 through June 30, 2021 we have not recognized any additional goodwill balance):
(in thousands) Six Months Ended
June 30, 2020
Goodwill balance at January 1, 2020 $ 716,865 
Business combination purchase price adjustments (2,418)
Impairment (714,447)
Goodwill balance at June 30, 2020 $ — 

Revenue Recognition

Oil, Gas, and NGL Sales

Revenue is recognized from the sales of oil, gas, and NGLs when the customer obtains control of the product, when we have no further obligations to perform related to the sale, and when collectability is probable. All of our sales of oil, gas, and NGLs are made under contracts with customers, which typically include variable consideration based on monthly pricing tied to local indices and monthly volumes delivered. The nature of our contracts with customers does not require us to constrain that variable consideration or to estimate the amount of transaction price attributable to future performance obligations for accounting purposes. As of June 30, 2021, we had open contracts with customers with terms of one month to multiple years, as well as “evergreen” contracts that renew on a periodic basis if not canceled by us or the customer. Performance obligations under our contracts with customers are typically satisfied at a point-in-time through monthly delivery of oil, gas, and/or NGLs. Our contracts with customers typically require payment within one month of delivery.

13

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Our gas is sold under various contracts. Under these contracts the gas and its components, including residue gas and NGLs, may be sold to a single purchaser or separate purchasers. Regardless of the contract, we are compensated for the value of the residue gas and NGLs at current market prices for each product. Depending on the specific contract terms, certain gathering, treating, transportation, processing, and other charges may be deducted against the prices we receive for the products. Our oil typically is sold at specific delivery points under contract terms that are common in our industry.

Gas Gathering

When we transport, process, and/or market third-party gas associated with our equity gas, we recognize revenue for the fees charged to third-parties for such services.

Gas Marketing

When we market and sell gas for other working interest owners, we act as agent under short-term sales and supply agreements and may earn a fee for such services. Revenues from such services are recognized as gas is delivered.

Gas Imbalances

Revenue from the sale of gas is recorded on the basis of gas actually sold by or for us. If our aggregate sales volumes for a well are greater (or less) than our proportionate share of production from the well, a liability (or receivable) is established to the extent there are insufficient proved reserves available to make-up the overproduced (or underproduced) imbalance. Imbalances have not been significant in the periods presented.

2.LONG-TERM DEBT

Long-term debt at June 30, 2021 and December 31, 2020 consisted of the following:
  June 30, 2021 December 31, 2020
(in thousands) Principal
Unamortized Debt
Issuance Costs
and Discounts (1)
Long-term
Debt, net
Principal
Unamortized Debt
Issuance Costs
and Discounts (1)
Long-term
Debt, net
4.375% Notes due 2024
$ 750,000  $ (2,254) $ 747,746  $ 750,000  $ (2,672) $ 747,328 
3.90% Notes due 2027
750,000  (5,156) 744,844  750,000  (5,541) 744,459 
4.375% Notes due 2029
500,000  (4,259) 495,741  500,000  (4,488) 495,512 
$ 2,000,000  $ (11,669) $ 1,988,331  $ 2,000,000  $ (12,701) $ 1,987,299 
________________________________________
(1)The 4.375% Notes due 2024 were issued at par, therefore, the amounts shown in the table are for unamortized debt issuance costs only. At June 30, 2021, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $4.0 million and $1.2 million, respectively. At June 30, 2021, the unamortized debt issuance costs and discount related to the 4.375% Notes due 2029 were $3.7 million and $0.6 million, respectively. At December 31, 2020, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $4.3 million and $1.3 million, respectively. At December 31, 2020, the unamortized debt issuance costs and discount related to the 4.375% Notes due 2029 were $3.9 million and $0.6 million, respectively.

14

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Bank Debt

On June 3, 2020, we entered into the First Amendment to Amended and Restated Credit Agreement (the “First Amendment”) dated as of February 5, 2019 for our senior unsecured revolving credit facility (“Credit Facility”). The Credit Facility has aggregate commitments of $1.25 billion with an option for us to increase the aggregate commitments to $1.5 billion, and matures on February 5, 2024. There is no borrowing base subject to the discretion of the lenders based on the value of our proved reserves under the Credit Facility. The First Amendment, among other things: (i) allows up to $3.5 billion of non-cash impairment charge add-backs to Shareholders’ Equity for covenant calculation purposes, (ii) institutes traditional anti-cash hoarding provisions (if borrowings are outstanding under the Credit Facility) at a consolidated cash threshold of $175.0 million, (iii) reduces the priority lien debt basket from 15% of Consolidated Net Tangible Assets (as defined in the credit agreement) to a $50.0 million cap, and (iv) adds an acknowledgement and consent to European Union bail-in legislation. As of June 30, 2021, we had no bank borrowings outstanding under the Credit Facility, but did have letters of credit of $2.5 million outstanding, leaving an unused borrowing availability of $1.248 billion.

At our option, borrowings under the Credit Facility may bear interest at either (a) LIBOR (or an alternate rate determined by the administrative agent for the Credit Facility in accordance with the Credit Facility when LIBOR is no longer available) plus 1.125 – 2.0% based on the credit rating for our senior unsecured long-term debt, or (b) a base rate (as defined in the credit agreement) plus 0.125 – 1.0%, based on the credit rating for our senior unsecured long-term debt. Unused borrowings are subject to a commitment fee of 0.125 – 0.35%, based on the credit rating for our senior unsecured long-term debt.

The Credit Facility contains representations, warranties, covenants, and events of default that are customary for investment grade, senior unsecured bank credit agreements, including a financial covenant for the maintenance of a defined total debt-to-capitalization ratio of no greater than 65%. As of June 30, 2021, we were in compliance with all of the financial covenants.

At June 30, 2021 and December 31, 2020, we had $3.6 million and $4.3 million, respectively, of unamortized debt issuance costs associated with our Credit Facility, which were recorded as assets and included in “Other assets” on our Condensed Consolidated Balance Sheets. These costs are being amortized to interest expense ratably over the life of the Credit Facility.

Senior Notes

In March 2019, we issued $500.0 million aggregate principal amount of 4.375% senior unsecured notes at 99.862% of par to yield 4.392% per annum. These notes are due March 15, 2029 and interest is payable semiannually on March 15 and September 15. The effective interest rate on these notes, including the amortization of debt issuance costs and discount, is 4.50%.

In April 2017, we issued $750.0 million aggregate principal amount of 3.90% senior unsecured notes at 99.748% of par to yield 3.93% per annum. These notes are due May 15, 2027 and interest is payable semiannually on May 15 and November 15. The effective interest rate on these notes, including the amortization of debt issuance costs and discount, is 4.01%.

In June 2014, we issued $750.0 million aggregate principal amount of 4.375% senior unsecured notes at par. These notes are due June 1, 2024 and interest is payable semiannually on June 1 and December 1. The effective interest rate on these notes, including the amortization of debt issuance costs, is 4.50%.

Our senior unsecured notes are governed by indentures containing certain covenants, events of default, and other restrictive provisions with which we were in compliance as of June 30, 2021.

15

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
3.    DERIVATIVE INSTRUMENTS

We periodically use derivative instruments to mitigate volatility in commodity prices. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future cash flow from favorable price changes. Depending on changes in oil and gas futures markets and management’s view of underlying supply and demand trends, we may increase or decrease our derivative positions from current levels. 

As of June 30, 2021, we have entered into oil and gas collars, oil basis swaps, and oil “roll differential” swaps. Under our collars, we receive the difference between the published index price and a floor price if the index price is below the floor price or we pay the difference between the ceiling price and the index price if the index price is above the ceiling price.  No amounts are paid or received if the index price is between the floor and the ceiling prices. By using a collar, we have fixed the minimum and maximum prices we can receive on the underlying production. Our basis swaps are settled based on the difference between a published index price plus or minus a fixed differential, as applicable, and the applicable local index price under which the underlying production is sold. By using a basis swap, we have fixed the differential between the published index price and certain of our physical pricing points. For our Permian oil production, the basis swaps fix the price differential between the WTI NYMEX (Cushing, Oklahoma) price and the WTI Midland price. For our Permian and Mid-Continent gas production, the contract prices in our collars are consistent with the index prices used to sell our production. Our roll differential swaps are settled based on the difference between the monthly roll differential and a fixed price per Bbl. The monthly roll differential is calculated as the sum of 2/3 of the difference in the WTI NYMEX closing settlement price for the first nearby month futures contract minus the second nearby month futures contract and 1/3 of the difference in the WTI NYMEX closing settlement price for the first nearby month futures contract minus the third nearby month futures contract. By using a roll differential swap, we have fixed the differential in pricing between the WTI NYMEX calendar month average price and the physical crude oil delivery month price. The following tables summarize our outstanding derivative contracts as of June 30, 2021:

Oil Collars First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2021:
WTI (1)
Volume (Bbls) —  —  3,680,000  3,680,000  7,360,000 
Weighted Avg Price - Floor $ —  $ —  $ 34.65  $ 34.65  $ 34.65 
Weighted Avg Price - Ceiling $ —  $ —  $ 44.37  $ 44.37  $ 44.37 
2022:
WTI (1)
Volume (Bbls) 3,060,000  2,457,000  1,656,000  736,000  7,909,000 
Weighted Avg Price - Floor $ 41.94  $ 43.74  $ 47.56  $ 57.00  $ 45.08 
Weighted Avg Price - Ceiling $ 54.06  $ 56.34  $ 59.52  $ 72.43  $ 57.62 
________________________________________
(1)The index price for these collars is West Texas Intermediate (“WTI”) as quoted on the New York Mercantile Exchange (“NYMEX”).
16

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Gas Collars First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2021:
PEPL (1)
Volume (MMBtu) —  —  8,280,000  8,280,000  16,560,000 
Weighted Avg Price - Floor $ —  $ —  $ 2.00  $ 2.00  $ 2.00 
Weighted Avg Price - Ceiling $ —  $ —  $ 2.42  $ 2.42  $ 2.42 
Perm EP (2)
Volume (MMBtu) —  —  6,440,000  6,440,000  12,880,000 
Weighted Avg Price - Floor $ —  $ —  $ 1.86  $ 1.86  $ 1.86 
Weighted Avg Price - Ceiling $ —  $ —  $ 2.22  $ 2.22  $ 2.22 
Waha (3)
Volume (MMBtu) —  —  9,200,000  9,200,000  18,400,000 
Weighted Avg Price - Floor $ —  $ —  $ 1.88  $ 1.88  $ 1.88 
Weighted Avg Price - Ceiling $ —  $ —  $ 2.23  $ 2.23  $ 2.23 
2022:
PEPL (1)
Volume (MMBtu) 7,200,000  3,640,000  1,840,000  1,840,000  14,520,000 
Weighted Avg Price - Floor $ 2.25  $ 2.50  $ 2.60  $ 2.60  $ 2.40 
Weighted Avg Price - Ceiling $ 2.73  $ 3.07  $ 3.27  $ 3.27  $ 2.95 
Perm EP (2)
Volume (MMBtu) 5,400,000  3,640,000  1,840,000  1,840,000  12,720,000 
Weighted Avg Price - Floor $ 2.25  $ 2.45  $ 2.50  $ 2.50  $ 2.38 
Weighted Avg Price - Ceiling $ 2.74  $ 3.01  $ 3.15  $ 3.15  $ 2.93 
Waha (3)
Volume (MMBtu) 8,100,000  4,550,000  2,760,000  1,840,000  17,250,000 
Weighted Avg Price - Floor $ 2.14  $ 2.44  $ 2.47  $ 2.50  $ 2.31 
Weighted Avg Price - Ceiling $ 2.59  $ 2.94  $ 3.00  $ 3.12  $ 2.80 
________________________________________
(1)The index price for these collars is Panhandle Eastern Pipe Line, Tex/OK Mid-Continent Index (“PEPL”) as quoted in Platt’s Inside FERC.
(2)The index price for these collars is El Paso Natural Gas Company, Permian Basin Index (“Perm EP”) as quoted in Platt’s Inside FERC.
(3)The index price for these collars is Waha West Texas Natural Gas Index (“Waha”) as quoted in Platt’s Inside FERC.
17

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Oil Basis Swaps First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2021:
WTI Midland (1)
Volume (Bbls) —  —  3,220,000  3,220,000  6,440,000 
Weighted Avg Differential (2) $ —  $ —  $ (0.08) $ (0.08) $ (0.08)
2022:
WTI Midland (1)
Volume (Bbls) 2,700,000  2,093,000  1,380,000  736,000  6,909,000 
Weighted Avg Differential (2) $ 0.20  $ 0.22  $ 0.20  $ 0.05  $ 0.19 
________________________________________
(1)The index price we pay under these basis swaps is WTI Midland as quoted by Argus Americas Crude.
(2)The index price we receive under these basis swaps is WTI as quoted on the NYMEX plus or minus, as applicable, the weighted average differential shown in the table.

Oil Roll Differential Swaps First
Quarter
Second
Quarter
Third
Quarter
Fourth
Quarter
Total
2021:
WTI (1)
Volume (Bbls) —  —  1,656,000  1,656,000  3,312,000 
Weighted Avg Price $ —  $ —  $ (0.10) $ (0.10) $ (0.10)
2022:
WTI (1)
Volume (Bbls) 1,620,000  1,001,000  644,000  —  3,265,000 
Weighted Avg Price $ (0.10) $ (0.01) $ 0.10  $ —  $ (0.03)
________________________________________
(1)The index price used to determine the settlement “roll” is WTI as quoted on the NYMEX.
18

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Derivative Gains and Losses

Net gains and losses on our derivative instruments are a function of fluctuations in the underlying commodity index prices as compared to the contracted prices and the monthly cash settlements (if any) of the instruments. We have elected not to designate our derivatives as hedging instruments for accounting purposes and, therefore, we do not apply hedge accounting treatment to our derivative instruments. Consequently, changes in the fair value of our derivative instruments and cash settlements on the instruments are included as a component of operating costs and expenses as either a net gain or loss on derivative instruments. Cash settlements of our contracts are included in cash flows from operating activities in our statements of cash flows. The following table presents the components of “Loss (gain) on derivative instruments, net” for the periods indicated.

  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2021 2020 2021 2020
Decrease (increase) in fair value of derivative instruments, net:
Gas contracts $ 40,026  $ 19,826  $ 39,579  $ 32,319 
Oil contracts 85,671  168,000  185,519  (28,319)
125,697  187,826  225,098  4,000 
Cash payments (receipts) on derivative instruments, net:
Gas contracts 14,403  (5,870) 29,668  (17,589)
Oil contracts 71,733  (58,071) 119,002  (89,466)
86,136  (63,941) 148,670  (107,055)
Loss (gain) on derivative instruments, net $ 211,833  $ 123,885  $ 373,768  $ (103,055)

19

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Derivative Fair Value

Our derivative contracts are carried at their fair value on our balance sheet using Level 2 inputs and are subject to master netting arrangements, which allow us to offset recognized asset and liability fair value amounts on contracts with the same counterparty. Our accounting policy is to not offset asset and liability positions in our balance sheets.

The following tables present the amounts and classifications of our derivative assets and liabilities as of June 30, 2021 and December 31, 2020, as well as the potential effect of netting arrangements on our recognized derivative asset and liability amounts.
  June 30, 2021
(in thousands) Balance Sheet Location Asset Liability
Oil contracts Current assets — Derivative instruments $ 1,246  $ — 
Oil contracts Non-current assets — Derivative instruments 1,284  — 
Gas contracts Non-current assets — Derivative instruments 1,174  — 
Oil contracts Current liabilities — Derivative instruments —  285,524 
Gas contracts Current liabilities — Derivative instruments —  81,067 
Oil contracts Non-current liabilities — Derivative instruments —  16,132 
Gas contracts Non-current liabilities — Derivative instruments —  35 
Total gross amounts presented in the balance sheet 3,704  382,758 
Less: gross amounts not offset in the balance sheet (3,704) (3,704)
Net amount $ —  $ 379,054 
  December 31, 2020
(in thousands) Balance Sheet Location Asset Liability
Oil contracts Current assets — Derivative instruments $ 5,425  $ — 
Gas contracts Current assets — Derivative instruments 1,423  — 
Gas contracts Non-current assets — Derivative instruments 2,342  — 
Oil contracts Current liabilities — Derivative instruments —  106,507 
Gas contracts Current liabilities — Derivative instruments —  38,891 
Oil contracts Non-current liabilities — Derivative instruments —  12,526 
Gas contracts Non-current liabilities — Derivative instruments —  5,223 
Total gross amounts presented in the balance sheet 9,190  163,147 
Less: gross amounts not offset in the balance sheet (8,863) (8,863)
Net amount $ 327  $ 154,284 

We are exposed to financial risks associated with our derivative contracts from non-performance by our counterparties. We mitigate our exposure to any single counterparty by contracting with a number of financial institutions, each of which has a high credit rating and is a member of our bank credit facility. Our member banks do not require us to post collateral for our derivative liability positions, nor do we require our counterparties to post collateral for our benefit. In the future we may enter into derivative instruments with counterparties outside our bank group to obtain competitive terms and to spread counterparty risk.

20

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
4.FAIR VALUE MEASUREMENTS

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Authoritative accounting guidance has established a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels. Level 1 inputs are the highest priority and consist of unadjusted quoted prices in active markets for identical assets and liabilities. Level 2 inputs are other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable.

The following table provides fair value measurement information for certain assets and liabilities as of June 30, 2021 and December 31, 2020:
  June 30, 2021 December 31, 2020
(in thousands) Book
Value
Fair
Value
Book
Value
Fair
Value
Financial Assets (Liabilities):
4.375% Notes due 2024
$ 750,000  $ (816,375) $ (750,000) $ (818,025)
3.90% Notes due 2027
$ 750,000  $ (826,800) $ (750,000) $ (826,575)
4.375% Notes due 2029
$ 500,000  $ (567,900) $ (500,000) $ (567,250)
Derivative instruments — assets $ 3,704  $ 3,704  $ 9,190  $ 9,190 
Derivative instruments — liabilities $ (382,758) $ (382,758) $ (163,147) $ (163,147)

Assessing the significance of a particular input to the fair value measurement requires judgment, including the consideration of factors specific to the asset or liability. The fair value (Level 1) of our fixed rate notes was based on quoted market prices. The fair value of our derivative instruments (Level 2) was estimated using discounted cash flow and option pricing models. These models use certain observable variables including forward prices, volatility curves, interest rates, and credit ratings and spreads. The fair value estimates are adjusted relative to non-performance risk as appropriate. See Note 3 for further information on the fair value of our derivative instruments.

Other Financial Instruments

The carrying amounts of our cash, cash equivalents, accounts receivable, accounts payable, and accrued liabilities approximate fair value because of the short-term maturities and/or liquid nature of these assets and liabilities. Included in “Accrued liabilities — Other” at June 30, 2021 are accrued operating expenses (e.g., production, transportation, and midstream expenses) of approximately $73.4 million. Included in “Accrued liabilities — Other” at December 31, 2020 are: (i) accrued operating expenses (e.g., production, transportation, and midstream expenses) of approximately $67.4 million and (ii) accrued general and administrative costs of approximately $46.8 million, which consisted primarily of $34.1 million in regular payroll-related costs and $11.3 million in voluntary early retirement incentive program and involuntary reduction in workforce severance accruals (the aggregate balance for these severance accruals decreased to $2.5 million at June 30, 2021 due to payments made during the six months ended June 30, 2021).

Most of our accounts receivable balances are uncollateralized and result from transactions with other companies in the oil and gas industry. Concentration of customers may impact our overall credit risk because our customers may be similarly affected by changes in economic or other conditions within the industry. We conduct credit analyses prior to making any sales to new customers or increasing credit for existing customers and may require parent company guarantees, letters of credit, or prepayments when deemed necessary. For properties we operate, we have the right to realize amounts due to us from non-operators by netting the non-operators’ share of production revenues from those properties.
21

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
We routinely assess the recoverability of all material accounts receivable and accrue a reserve to the allowance for credit losses based on our estimation of expected losses over the life of the receivables. At June 30, 2021 and December 31, 2020, the allowance for credit losses totaled $3.0 million and $2.6 million, respectively.

5.CAPITAL STOCK

Authorized capital stock consists of 200 million shares of common stock and 15 million shares of preferred stock. At June 30, 2021, there were 102.8 million shares of common stock outstanding and 28.2 thousand shares of 8.125% Series A Cumulative Perpetual Convertible Preferred Stock outstanding (the “Preferred Stock”). Holders of the Preferred Stock are entitled to receive, when, as, and if declared by the Board, cumulative cash dividends at an annual rate of 8.125% of each share’s liquidation preference of $1,000. In the event of any liquidation, winding up, or dissolution of Cimarex, each holder will be entitled to receive in respect of its shares, up to each share’s liquidation preference, with the total liquidation preference being $28.2 million in the aggregate at June 30, 2021, after satisfaction of liabilities and any senior stock (of which there is currently none) and before any payment or distribution to holders of junior stock (including common stock). Each holder has the right at any time, at its option, to convert any or all of such holder’s shares of Preferred Stock into a certain number of shares of Cimarex common stock based on a conversion rate that adjusts upon the occurrence of certain events, including the payment of cash dividends to common shareholders, and $471.40 in cash per share of Preferred Stock. The June 30, 2021 conversion rate was 8.45897 shares of common stock for each share of Preferred Stock. As a result of the cash component included in the redemption feature of the Preferred Stock conversion option, which conversion is not solely within our control, the instruments are classified as “Redeemable preferred stock” in temporary equity on the Condensed Consolidated Balance Sheets.

Dividends

Common Stock

In May 2021, our Board of Directors declared a cash dividend of $0.27 per share of common stock. The dividend is payable on or before September 1, 2021 to stockholders of record on August 13, 2021. Dividends declared are recorded as a reduction of retained earnings to the extent retained earnings are available at the close of the period prior to the date of the declared dividend. Dividends in excess of retained earnings are recorded as a reduction of additional paid-in capital. The $27.9 million dividend declared during the second quarter 2021 was recorded as a reduction of additional paid-in capital and is included as a payable in “Accrued liabilities — Other” on the Condensed Consolidated Balance Sheet at June 30, 2021. Nonforfeitable dividends paid on unvested stock awards that subsequently forfeit are reclassified out of retained earnings or additional paid-in capital, as applicable, to stock-based compensation expense in the period in which the stock award forfeitures occur. Future dividend payments will depend on our level of earnings, financial requirements, and other factors considered relevant by our Board of Directors.

Preferred Stock

In May 2021, our Board of Directors declared a cash dividend of $20.3125 per share of Preferred Stock. The dividend was paid in July to stockholders of record on July 1, 2021. This $0.6 million dividend was recorded as a reduction of additional paid-in capital and is included as a payable in “Accrued liabilities — Other” on the Condensed Consolidated Balance Sheet at June 30, 2021.

22

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
6.STOCK-BASED COMPENSATION

We have recognized stock-based compensation cost as shown below for the periods indicated.
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2021 2020 2021 2020
Restricted stock awards:    
Performance stock awards $ 3,441  $ 4,059  $ 6,723  $ 8,119 
Service-based stock awards 6,543  6,585  14,842  13,962 
9,984  10,644  21,565  22,081 
Stock option awards 426  416  900  914 
Total stock-based compensation cost 10,410  11,060  22,465  22,995 
Less amounts capitalized to oil and gas properties (2,532) (4,313) (6,038) (9,854)
Stock-based compensation expense $ 7,878  $ 6,747  $ 16,427  $ 13,141 

Periodic stock-based compensation expense will fluctuate based on the grant-date fair value of awards, the number of awards, the requisite service period of the awards, employee forfeitures, and the timing of the awards. Our accounting policy is to account for forfeitures in compensation cost when they occur. To the extent compensation cost relates to employees directly involved in oil and gas property acquisition, exploration, and development activities, such amounts are capitalized to oil and gas properties. The amount of stock-based compensation cost capitalized to oil and gas properties decreased as a percentage of total stock-based compensation cost during the three and six months ended June 30, 2021 as compared to the three and six months ended June 30, 2020 as a result of decreased acquisition, exploration, and development activities in response to the lower oil prices and demand destruction seen after the first quarter of 2020. The decreased capitalization caused overall stock-based compensation expense to increase.

7.ASSET RETIREMENT OBLIGATIONS

The following table reflects the components of the change in the carrying amount of the asset retirement obligation for the six months ended June 30, 2021:
(in thousands) Six Months Ended
June 30, 2021
Asset retirement obligation at January 1, 2021 $ 177,867 
Liabilities incurred 2,967 
Liability settlements and disposals (77,531)
Accretion expense 3,730 
Revisions of estimated liabilities 25,149 
Asset retirement obligation at June 30, 2021 132,182 
Less current obligation (12,629)
Long-term asset retirement obligation $ 119,553 

23

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
8.EARNINGS (LOSS) PER SHARE

The calculations of basic and diluted net earnings (loss) per common share under the two-class method are presented below for the periods indicated. Earnings (loss) per share are based on whole numbers rather than the rounded numbers presented.
Three Months Ended June 30,
2021 2020
(in thousands, except per share information) Income (Numerator) Shares (Denominator) Per-Share Amount Income (Numerator) Shares (Denominator) Per-Share Amount
Net income (loss) $ 113,388    $ (925,147)
Less: dividends and net income attributable to participating securities (1) (2,399) (569)
Less: redeemable preferred stock dividends (572) (1,269)
Basic earnings (loss) per share
Income (loss) available to common stockholders 110,417  100,194  $ 1.10  (926,985) 99,880  $ (9.28)
Effects of dilutive securities
Dilutive securities (2) 91  —  — 
Diluted earnings (loss) per share
Income (loss) available to common stockholders and assumed conversions $ 110,418  100,285  $ 1.10  $ (926,985) 99,880  $ (9.28)

Six Months Ended June 30,
2021 2020
(in thousands, except per share information) Income (Numerator) Shares (Denominator) Per-Share Amount Income (Numerator) Shares (Denominator) Per-Share Amount
Net income (loss) $ 241,470  $ (1,699,429)
Less: dividends and net income attributable to participating securities (1) (5,172) (1,119)
Less: redeemable preferred stock dividends (1,144) (2,538)
Basic earnings (loss) per share
Income (loss) available to common stockholders 235,154  100,160  $ 2.35  (1,703,086) 99,861  $ (17.05)
Effects of dilutive securities
Dilutive securities (2) 68  —  — 
Diluted earnings (loss) per share
Income (loss) available to common stockholders and assumed conversions $ 235,156  100,228  $ 2.35  $ (1,703,086) 99,861  $ (17.05)
________________________________________
(1)Participating securities do not have a contractual obligation to share in the losses of the entity, therefore, net losses are not attributable to participating securities.
24

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
(2)Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings (loss) per share. Excluded from the calculation for the three months ended June 30, 2021 were 427.4 thousand potential common shares from the assumed exercise of employee stock options and 238.2 thousand potential common shares from the assumed conversion of the Preferred Stock. Excluded from the calculation for the three months ended June 30, 2020 were 456.6 thousand potential common shares from the assumed exercise of employee stock options, 515.8 thousand potential common shares from the assumed conversion of the Preferred Stock, and 8.8 thousand potential common shares from the assumed vesting of incremental shares of unvested restricted stock units. Excluded from the calculation for the six months ended June 30, 2021 were 450.7 thousand potential common shares from the assumed exercise of employee stock options and 238.2 thousand potential common shares from the assumed conversion of the Preferred Stock. Excluded from the calculation for the six months ended June 30, 2020 were 456.6 thousand potential common shares from the assumed exercise of employee stock options, 515.8 thousand potential common shares from the assumed conversion of the Preferred Stock, and 8.8 thousand potential common shares from the assumed vesting of incremental shares of unvested restricted stock units.

9.INCOME TAXES

The components of our provision for income taxes and our combined federal and state effective income tax rates were as follows:
Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2021 2020 2021 2020
Current tax expense (benefit) $ 442  $ 37  $ 442  $ (161)
Deferred tax expense (benefit) 34,550  (271,543) 74,720  (287,900)
$ 34,992  $ (271,506) $ 75,162  $ (288,061)
Combined federal and state effective income tax rate 23.6% 22.7% 23.7% 14.5%

Our combined federal and state effective income tax rates differ from the U.S. federal statutory rate of 21% primarily due to state income taxes, non-deductible expenses, and changes in valuation allowances. The combined federal and state effective income tax rate for the six months ended June 30, 2020 was impacted by the non-deductible impairment of goodwill recorded during the first quarter 2020.

At December 31, 2020, we had a U.S. net tax operating loss carryforward of approximately $1.997 billion, $1.773 billion of which is subject to expiration in tax years 2032 through 2037 and $224.4 million of which is not subject to expiration. We believe that the carryforward, net of valuation allowance, will be utilized before it expires. We also had enhanced oil recovery and marginal well credits of $4.2 million at December 31, 2020.

The total valuation allowance on state net operating losses at December 31, 2020 was $120.7 million since it is not more likely than not that these additional state net operating losses will be utilized before they expire. When assessing the need for a valuation allowance against a deferred tax asset, both positive and negative evidence is considered when determining the ability to utilize our deferred tax assets. Based on our estimate of the timing of future reversals of existing taxable temporary differences, our estimate of future taxable income exclusive of reversing temporary differences and carryforwards, the length of time before the deferred tax assets associated with the net operating loss carryovers begin to expire, and tax planning strategies that could be implemented to accelerate taxable amounts to utilize expiring carryovers, we believe it is more likely than not that the benefit from the deferred tax asset recorded in the financial statements will be realized. We will continue to assess all available positive and negative evidence to estimate whether sufficient future taxable income will be generated in order to utilize the deferred tax assets. Additional valuation allowances may be required in future periods if additional losses are incurred or other circumstances change.
25

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)

At June 30, 2021, we had no unrecognized tax benefits that would impact our effective tax rate and have made no provisions for interest or penalties related to uncertain tax positions. The tax years 2017 through 2019 remain open to examination by the Internal Revenue Service of the United States. We file tax returns with various state taxing authorities, which remain open to examination for tax years 2016 through 2019.

10.COMMITMENTS AND CONTINGENCIES

At June 30, 2021, we had estimated commitments of approximately: (i) $224.8 million to finish drilling, completing, or performing other work on wells and various other infrastructure projects in progress and (ii) $4.8 million to finish midstream construction in progress.

At June 30, 2021, we had firm sales contracts to deliver approximately 456.5 Bcf of gas over the next 10.0 years. If we do not deliver this gas, our estimated financial commitment, calculated using the July 2021 index prices, would be approximately $1.433 billion. The value of this commitment will fluctuate due to price volatility and actual volumes delivered.

In connection with gas gathering and processing agreements, we have volume commitments over the next 15.0 years. If we do not deliver the committed gas or NGLs, as applicable, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2021, would be approximately $728.6 million.

We have minimum volume delivery commitments associated with agreements to reimburse connection costs to various pipelines. If we do not deliver this gas or oil, as applicable, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2021, would be approximately $104.0 million. Of this total, we have accrued a liability of $4.1 million representing the estimated amount we will have to pay due to insufficient forecasted volumes at particular connection points.

At June 30, 2021, we have various firm transportation agreements for gas pipeline capacity with end dates ranging from 2021 - 2025 under which we will have to pay an estimated $16.1 million over the remaining terms of the agreements.

We have minimum volume water delivery commitments associated with a water services agreement that ends in 2030. If the water volumes are not delivered by us or third parties, the estimated maximum amount that would be payable by us under this commitment, calculated as of June 30, 2021, would be approximately $60.8 million. Of this total, we have accrued a liability of $0.7 million representing the estimated amount we will have to pay due to insufficient forecasted volumes at particular connection points.

In May 2021, we entered into a lease for the use of an electric hydraulic fracturing fleet and the personnel and other equipment required to use the fleet for a period of four years. The lessor is constructing the fleet and the lease will commence on the earlier of the commencement of field activity or June 30, 2022. Upon commencement of the lease, we expect to record a lease liability and right-of-use asset of between $150.0 million and $160.0 million.

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

26

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
Litigation

In the ordinary course of business, we are involved with various litigation matters. When a loss contingency exists, we assess the likelihood that a future event or events will confirm the loss or impairment of an asset or the incurrence of a liability. If the likelihood is probable, we accrue a loss if reasonably estimable. Though some of the related claims may be significant, we believe the resolution of them, individually or in the aggregate, would not have a material adverse effect on our financial condition or results of operations.

In June and July 2021, four putative stockholders of Cimarex filed separate lawsuits against Cimarex and its board of directors related to the proposed merger (the “Merger”) of Cabot Oil & Gas Corporation and Cimarex. See Note 13 to the Condensed Consolidated Financial Statements for additional information regarding the merger. Three of the lawsuits were filed in the United States District Court for the Southern District of New York and are captioned Wang v. Cimarex, et al., Case No. 1:21-cv-05672, Graff v. Cimarex, et al., Case No. 1:21-cv-05804, and Elliot v. Cimarex, et al., Case No. 1:21-cv-06315. The fourth lawsuit was filed in the United States District Court for the District of Colorado and is captioned Woodyard v. Cimarex, et al., Case No. 1:21-cv-01850. Each of the actions is asserted only on behalf of the named plaintiff.

All four actions allege violations of Section 14(a) and 20(a) of the Securities Exchange Act of 1934 (the Exchange Act) and Rule 14a-9 promulgated thereunder based on various alleged omissions of material information from the registration statement on Form S-4 filed in connection with the Merger. One of the actions (Elliot) also asserts claims that the members of the Cimarex board of directors breached fiduciary duties in connection with the Merger, and that Cimarex aided and abetted those alleged breaches. Each action names as defendants Cimarex and each of its directors, and seeks, among other things, to enjoin the Merger (or, in the alternative, rescission or an award for rescissory damages in the event the Merger is completed), an award of costs and attorneys’ and experts’ fees, and such other and further relief as the court may deem just and proper. We believe that the actions are without merit.

11.    SUPPLEMENTAL CASH FLOW INFORMATION
  Three Months Ended
June 30,
Six Months Ended
June 30,
(in thousands) 2021 2020 2021 2020
Cash paid during the period for:        
Interest (net of capitalized amounts of $16,001, $18,145, $22,014 and $25,473, respectively)
$ 16,553  $ 14,050  $ 22,538  $ 19,609 
Income taxes $ 541  $ —  $ 571  $ — 
Cash received for income tax refunds $ 103  $ 280  $ 369  $ 484 

12.RELATED PARTY TRANSACTIONS

Helmerich & Payne, Inc. (“H&P”) provides contract drilling services to Cimarex. Cimarex incurred drilling costs of approximately $2.3 million and $5.2 million related to these services during the three and six months ended June 30, 2021 and $7.8 million and $23.4 million during the three and six months ended June 30, 2020. Hans Helmerich, a director of Cimarex, is Chairman of the Board of Directors of H&P.


27

CIMAREX ENERGY CO.
Notes to Condensed Consolidated Financial Statements
June 30, 2021
(Unaudited)
13.MERGER AND DIVESTITURES

Merger

On May 23, 2021, Cimarex entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cabot Oil & Gas Corporation (“Cabot”) and Double C Merger Sub, Inc., a wholly-owned subsidiary of Cabot (“Merger Sub”). The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement: (i) Merger Sub will be merged with and into Cimarex (the “Merger”), with Cimarex surviving and continuing as a wholly-owned subsidiary of Cabot in the Merger, and (ii) at the effective time of the Merger, each outstanding share of common stock of Cimarex (other than certain Excluded Shares, Converted Shares, or shares of Cimarex common stock subject to a Cimarex Restricted Share Award (each as defined in the Merger Agreement)) will be converted into the right to receive 4.0146 shares of common stock of Cabot. Following the closing of the Merger, Cimarex’s existing stockholders and Cabot’s existing stockholders will own approximately 50.5% and 49.5%, respectively, of the issued and outstanding shares of the combined company. The transaction is expected to close in the fourth quarter of 2021, subject to the approval of Cimarex and Cabot stockholders and the satisfaction of other customary closing conditions. Other operating expense, net during the six months ended June 30, 2021 included $8.1 million in expenses related to the Cabot merger. These expenses were primarily for advisory and legal services.

Divestitures

During the three months ended June 30, 2021, we closed on divestitures of non-core oil and gas properties and related assets in West Texas and Southern Oklahoma for which we received $111.0 million in net cash proceeds. Final settlements, which will reflect customary post-closing adjustments, are expected to occur in the third or fourth quarter of 2021. These divestitures did not significantly alter the relationship between capitalized costs and proved reserves, therefore, in accordance with the full cost method of accounting, no gain or loss was recognized.
28

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

OVERVIEW

Cimarex is an independent oil and gas exploration and production company. Our operations are located entirely within the United States, mainly in Texas, New Mexico, and Oklahoma. Currently our operations are focused in two main areas: the Permian Basin and the Mid-Continent. Our Permian Basin region encompasses west Texas and southeast New Mexico. Our Mid-Continent region encompasses Oklahoma and the Texas Panhandle.

Our principal business objective is to increase shareholder value through the profitable growth of our proved reserves and production while seeking to minimize our impact on the communities in which we operate for the long-term. Our strategy centers on maximizing cash flow from producing properties for reinvestment in exploration and development activities and for providing cash returns to shareholders through dividends and debt reduction. We consider merger and acquisition opportunities that enhance our competitive position and we occasionally divest non-core assets, such as our divestitures during the three months ended June 30, 2021 of non-core oil and gas properties and related assets in West Texas and Southern Oklahoma for which we received $111.0 million in net cash proceeds.

We believe that detailed technical analysis, operational focus, and a disciplined capital investment process mitigates risk and positions us to continue to achieve profitable increases in proved reserves and production. Our drilling inventory and limited long-term commitments provide the flexibility to respond quickly to industry volatility. Our investments are generally funded with cash flow provided by operating activities together with cash on hand, bank borrowings, sales of non-core assets, and, from time to time, public financing based on our monitoring of capital markets and our balance sheet.

Merger

On May 23, 2021, Cimarex entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Cabot Oil & Gas Corporation (“Cabot”) and Double C Merger Sub, Inc., a wholly-owned subsidiary of Cabot (“Merger Sub”). The Merger Agreement provides that, among other things and subject to the terms and conditions of the Merger Agreement: (i) Merger Sub will be merged with and into Cimarex (the “Merger”), with Cimarex surviving and continuing as a wholly-owned subsidiary of Cabot in the Merger, and (ii) at the effective time of the Merger, each outstanding share of common stock of Cimarex (other than certain Excluded Shares, Converted Shares, or shares of Cimarex common stock subject to a Cimarex Restricted Share Award (each as defined in the Merger Agreement)) will be converted into the right to receive 4.0146 shares of common stock of Cabot. Following the closing of the Merger, Cimarex’s existing stockholders and Cabot’s existing stockholders will own approximately 50.5% and 49.5%, respectively, of the issued and outstanding shares of the combined company. The transaction is expected to close in the fourth quarter of 2021, subject to the approval of Cimarex and Cabot stockholders and the satisfaction of other customary closing conditions.

Market Conditions

The oil and gas industry is cyclical and commodity prices can fluctuate significantly. We expect this volatility to persist. Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, inventory storage levels, weather conditions, and other factors. Local market prices for oil and gas can be impacted by pipeline capacity constraints limiting takeaway and increasing basis differentials.

In the first quarter of 2020, the highly transmissible and pathogenic coronavirus known as severe acute respiratory syndrome coronavirus 2 (SARS-CoV-2) that causes the disease known as COVID-19 began to spread globally. The reduction in economic activity from the COVID-19 pandemic resulted in unprecedented demand destruction and inventory increases for oil and natural gas liquids. In addition, in early March 2020, members of the Organization of the Petroleum Exporting Countries (“OPEC”) and Russia failed to reach an agreement on oil production limits and Saudi Arabia unilaterally reduced the sales price of its oil and announced that it would
29

increase its oil production. As a result of these actions and the COVID-19 pandemic, WTI oil prices dropped and even became negative for a brief time in April 2020. Oil prices have improved since then, coinciding with some recovery of global economic activity, lower supply from major oil producing countries, and moderating inventory levels. However, while COVID-19 vaccines have become more widely available, variants of the virus that causes COVID-19 continue to cause concerns that the demand recovery for oil and natural gas liquids could stall. Additionally, OPEC has recently agreed to increase production beginning in August 2021, which could lead to lower oil prices as supply increases.

Our average realized price for oil during the six months ended June 30, 2021 improved to $60.12 per barrel, increasing 84% over our average realized price for oil during the six months ended June 30, 2020. In February 2021, Texas and Oklahoma experienced an extreme winter weather event that included freezing rain, sleet, snow, and freezing temperatures over an extended period. This event caused gas demand to exceed gas supply as demand increased while supplies were simultaneously curtailed by power outages, frozen equipment, impassable roads, and other impacts of the severe weather, significantly increasing gas prices. Our average realized price for gas during the six months ended June 30, 2021 was $3.30 per Mcf, increasing 358% over our average realized price for gas during the six months ended June 30, 2020.

The table below presents average NYMEX prices and our company-wide average realized prices and price differentials for the periods indicated.

Three Months Ended
June 30,
Variance Between
2021 / 2020
Six Months Ended
June 30,
Variance Between 2021 / 2020
2021 2020 2021 2020
Average NYMEX price      
Oil — per barrel $ 66.07  $ 27.85  137% $ 61.96  $ 37.01  67%
Gas — per Mcf $ 2.80  $ 1.71  64% $ 2.76  $ 1.83  51%
Average realized price      
Oil — per barrel $ 64.11  $ 19.57  228% $ 60.12  $ 32.74  84%
Gas — per Mcf $ 2.51  $ 0.91  176% $ 3.30  $ 0.72  358%
NGL — per barrel $ 23.16  $ 7.52  208% $ 22.83  $ 8.71  162%
Average price differential      
Oil — per barrel $ (1.96) $ (8.28) 76% $ (1.84) $ (4.27) 57%
Gas — per Mcf $ (0.29) $ (0.80) 64% $ 0.54  $ (1.11) 149%

30

The average price differentials that we realized in our two primary areas of operation are shown in the table below for the periods indicated.
Average Price Differentials
2021 2020
Year-to-date Second
Quarter
First
Quarter
Year Fourth
Quarter
Third
Quarter
Second
Quarter
First
Quarter
Oil
Permian Basin $ (1.81) $ (1.91) $ (2.00) $ (3.74) $ (2.79) $ (2.71) $ (8.12) $ (2.00)
Mid-Continent $ (1.96) $ (2.11) $ (1.96) $ (4.43) $ (0.99) $ (5.06) $ (9.53) $ (2.02)
Total Company $ (1.84) $ (1.96) $ (1.99) $ (3.81) $ (2.57) $ (2.99) $ (8.28) $ (1.99)
Gas
Permian Basin $ 0.39  $ (0.44) $ 1.29  $ (1.39) $ (1.34) $ (1.15) $ (1.09) $ (1.85)
Mid-Continent $ 0.82  $ (0.02) $ 1.69  $ (0.41) $ (0.36) $ (0.31) $ (0.31) $ (0.57)
Total Company $ 0.54  $ (0.29) $ 1.43  $ (1.03) $ (0.98) $ (0.84) $ (0.80) $ (1.40)

Pipeline expansion projects in the Permian Basin and reduced drilling activity and production have eased take away constraints and improved price differentials over prior year. However, if pipeline projects are delayed, production increases faster than capacity increases, or the basin experiences pipeline disruptions or other constraints, differentials could potentially worsen. Our revenue, profitability, and future growth are highly dependent on the prices we receive for our oil and gas production and can be adversely affected by realized price decreases.

See RISK FACTORS in Item 1A of this Form 10-Q and in our Annual Report on Form 10-K for the year ended December 31, 2020, for a discussion of risk factors that affect our business, financial condition, and results of operations. Also, see CAUTIONARY INFORMATION ABOUT FORWARD-LOOKING STATEMENTS in this report for important information about these types of statements.

Summary of Operating and Financial Results for the Six Months Ended June 30, 2021 Compared to the Six Months Ended June 30, 2020:

Total production volumes decreased 14% to 228.4 MBOE per day.

Oil volumes decreased 16% to 70.7 MBbls per day.

Gas volumes decreased 15% to 572.2 MMcf per day.

NGL volumes decreased 10% to 62.4 MBbls per day.

Total production revenue increased 96% to $1.369 billion.

Cash flow provided by operating activities increased 69% to $766.6 million.

Exploration and development investments increased 8% to $357.8 million.

Net income was $241.5 million, or $2.35