10-Q

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, 2019
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, 2019 was 101,457,009.

CIMAREX ENERGY CO.

Table of Contents

		Page
PART I — FINANCIAL INFORMATION
Item 1.	Financial Statements
	Condensed Consolidated Balance Sheets (Unaudited) as of June 30, 2019 and December 31, 2018	4
	Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) for the three months and six months ended June 30, 2019 and 2018	5
	Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2019 and 2018	6
	Condensed Consolidated Statement of Stockholders’ Equity (Unaudited) for the three months and six months ended June 30, 2019 and 2018	7
	Notes to Condensed Consolidated Financial Statements (Unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	50
Item 4.	Controls and Procedures	51
PART II — OTHER INFORMATION
Item 1.	Legal Proceedings	52
Item 1A.	Risk Factors	52
Item 6.	Exhibits	53
Signatures		54

GLOSSARY

Bbls—Barrels

Bcf—Billion cubic feet

BOE—Barrels of oil equivalent

Gross Wells—The total wells in which a working interest is owned.

MBbls—Thousand barrels

MBOE—Thousand barrels of oil equivalent

Mcf—Thousand cubic feet

MMBtu—Million British thermal units

MMcf—Million cubic feet

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 crude 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, as amended, and Section 21E of the Securities and Exchange Act of 1934, as amended.  These forward-looking statements include, among others, statements concerning our outlook with regard to timing and amount of future production of oil and gas, price realizations, amounts, nature and timing of capital expenditures for exploration and development, plans for funding operations and capital expenditures, drilling of wells, operating costs and other expenses, marketing of oil, gas, and NGLs and other statements of expectations, beliefs, future plans and strategies, anticipated events or trends, and similar expressions concerning matters that are not historical facts.  The forward-looking statements in this report are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in or implied by the statements.

These risks and uncertainties include, but are not limited to, fluctuations in the price we receive for our oil and gas production, full cost ceiling test impairments to the carrying values of our oil and gas properties, reductions in the quantity of, and price received for, oil and gas sold due to decreased industry-wide demand and/or curtailments in production from specific properties or areas due to mechanical, transportation, marketing, weather or other problems, operating and capital expenditures that are either significantly higher or lower than anticipated because the actual cost of identified projects varied from original estimates and/or from the number of exploration and development opportunities being greater or fewer than currently anticipated, increased financing costs due to a significant increase in interest rates, availability of financing, our ability to successfully integrate the business acquired from Resolute Energy Corporation, and the effectiveness of our internal control over financial reporting and our ability to remediate a material weakness in our internal control over financial reporting.  In addition, exploration and development opportunities that we pursue may not result in economic, productive oil and gas properties.  There are also numerous uncertainties inherent in estimating quantities of proved reserves, projecting future rates of production and the timing of development expenditures.  These and other risks and uncertainties affecting us are discussed in greater detail in this report and in our other filings with the Securities and Exchange Commission.

3

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,
	2019			2018
Assets
Current assets:
Cash and cash equivalents	$	19,414		$	800,666
Accounts receivable, net of allowance:
Trade	111,745			122,065
Oil and gas sales	267,821			315,063
Gas gathering, processing, and marketing	7,796			17,072
Oil and gas well equipment and supplies	58,306			55,553
Derivative instruments	42,957			101,939
Prepaid expenses	8,985			7,554
Other current assets	3,032			4,227
Total current assets	520,056			1,424,139
Oil and gas properties at cost, using the full cost method of accounting:
Proved properties	19,846,426			18,566,757
Unproved properties and properties under development, not being amortized	1,564,074			436,325
	21,410,500			19,003,082
Less—accumulated depreciation, depletion, amortization, and impairment	(15,659,363		)	(15,287,752		)
Net oil and gas properties	5,751,137			3,715,330
Fixed assets, net of accumulated depreciation of $356,631 and $324,631, respectively	526,429			257,686
Goodwill	727,573			620,232
Derivative instruments	613			9,246
Other assets	70,126			35,451
	$	7,595,934		$	6,062,084
Liabilities, Redeemable Preferred Stock, and Stockholders’ Equity
Current liabilities:
Accounts payable:
Trade	$	104,142		$	76,927
Gas gathering, processing, and marketing	14,934			29,887
Accrued liabilities:
Exploration and development	108,299			124,674
Taxes other than income	38,201			33,622
Other	250,710			221,159
Derivative instruments	50,056			27,627
Revenue payable	186,206			194,811
Operating leases	62,119			—
Total current liabilities	814,667			708,707
Long-term debt principal	2,000,000			1,500,000
Less—unamortized debt issuance costs and discounts	(15,770		)	(11,446		)
Long-term debt, net	1,984,230			1,488,554
Deferred income taxes	439,429			334,473
Asset retirement obligation	157,381			152,758
Derivative instruments	840			2,267
Operating leases	191,413			—
Other liabilities	64,461			45,539
Total liabilities	3,652,421			2,732,298
Commitments and contingencies (Note 10)
Redeemable preferred stock - 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, $0.01 par value, 62,500 shares authorized and issued and no shares authorized and issued, respectively (Note 5)	81,620			—
Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 101,473,177 and 95,755,797 shares issued, respectively	1,015			958
Additional paid-in capital	3,223,331			2,785,188
Retained earnings	635,339			542,885
Accumulated other comprehensive income	2,208			755
Total stockholders’ equity	3,861,893			3,329,786
	$	7,595,934		$	6,062,084

See accompanying Notes to Condensed Consolidated Financial Statements.

4

CIMAREX ENERGY CO.

Condensed Consolidated Statements of Operations and Comprehensive Income

(in thousands, except per share information)

(Unaudited)

	Three Months Ended June 30,						Six Months Ended June 30,
	2019			2018			2019			2018
Revenues:
Oil sales	$	411,766		$	342,184		$	761,072		$	693,907
Gas and NGL sales	126,044			202,202			343,959			405,920
Gas gathering and other	9,769			11,810			20,031			23,262
Gas marketing	(1,116		)	78			(1,642		)	319
	546,463			556,274			1,123,420			1,123,408
Costs and expenses:
Depreciation, depletion, and amortization	213,327			143,388			403,744			276,247
Asset retirement obligation	2,157			2,053			4,206			3,113
Production	87,726			79,215			164,959			150,486
Transportation, processing, and other operating	48,331			51,933			101,939			97,098
Gas gathering and other	13,605			9,467			25,925			19,290
Taxes other than income	41,033			27,930			74,727			58,118
General and administrative	24,911			19,739			53,995			43,060
Stock compensation	6,494			3,095			13,207			9,825
(Gain) loss on derivative instruments, net	(40,768		)	21,699			74,684			17,540
Other operating expense, net	590			5,252			8,916			5,455
	397,406			363,771			926,302			680,232
Operating income	149,057			192,503			197,118			443,176
Other (income) and expense:
Interest expense	24,674			16,895			45,079			33,678
Capitalized interest	(16,805		)	(4,850		)	(25,547		)	(9,660		)
Loss on early extinguishment of debt	—			—			4,250			—
Other, net	(2,167		)	(2,605		)	(4,408		)	(7,172		)
Income before income tax	143,355			183,063			177,744			426,330
Income tax expense	34,046			42,066			42,119			99,015
Net income	$	109,309		$	140,997		$	135,625		$	327,315
Earnings per share to common stockholders:
Basic	$	1.07		$	1.48		$	1.34		$	3.44
Diluted	$	1.07		$	1.48		$	1.34		$	3.44
Comprehensive income:
Net income	$	109,309		$	140,997		$	135,625		$	327,315
Other comprehensive income:
Change in fair value of investments, net of tax of $89, $57, $428 and $1, respectively	304			192			1,453			2
Total comprehensive income	$	109,613		$	141,189		$	137,078		$	327,317

 

See accompanying Notes to Condensed Consolidated Financial Statements.

5

CIMAREX ENERGY CO.

Condensed Consolidated Statements of Cash Flows

(in thousands)

(Unaudited)

	Six Months Ended June 30,
	2019			2018
Cash flows from operating activities:
Net income	$	135,625		$	327,315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization	403,744			276,247
Asset retirement obligation	4,206			3,113
Deferred income taxes	42,119			99,732
Stock compensation	13,207			9,825
Loss on derivative instruments, net	74,684			17,540
Settlements on derivative instruments	(2,814		)	(19,919		)
Loss on early extinguishment of debt	4,250			—
Amortization of debt issuance costs and discounts	1,502			1,456
Changes in non-current assets and liabilities	2,749			713
Other, net	8,152			723
Changes in operating assets and liabilities:
Accounts receivable	117,692			15,012
Other current assets	(761		)	1,886
Accounts payable and other current liabilities	(140,272		)	(29,304		)
Net cash provided by operating activities	664,083			704,339
Cash flows from investing activities:
Acquisition of Resolute Energy, net of cash acquired (Note 13)	(284,441		)	—
Oil and gas capital expenditures	(711,757		)	(650,807		)
Other capital expenditures	(40,141		)	(56,112		)
Sales of oil and gas assets	13,233			34,842
Sales of other assets	434			525
Net cash used by investing activities	(1,022,672		)	(671,552		)
Cash flows from financing activities:
Borrowings of long-term debt	1,710,310			—
Repayments of long-term debt	(2,081,000		)	—
Financing, underwriting, and debt redemption fees	(11,791		)	—
Finance lease payments	(1,555		)	—
Dividends paid	(38,647		)	(22,801		)
Employee withholding taxes paid upon the net settlement of equity-classified stock awards	(654		)	(946		)
Proceeds from exercise of stock options	674			1,249
Net cash used by financing activities	(422,663		)	(22,498		)
Net change in cash and cash equivalents	(781,252		)	10,289
Cash and cash equivalents at beginning of period	800,666			400,534
Cash and cash equivalents at end of period	$	19,414		$	410,823

  

See accompanying Notes to Condensed Consolidated Financial Statements.

6

CIMAREX ENERGY CO.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(Unaudited)

					Additional Paid-in Capital			Retained Earnings			Accumulated Other Comprehensive Income		Total Stockholders’ Equity
	Common Stock
	Shares		Amount
Balance, December 31, 2018	95,756		$	958	$	2,785,188		$	542,885		$	755	$	3,329,786
Dividends paid on stock awards subsequently forfeited	—		—		—			2			—		2
Dividends declared on common stock ($0.20 per share)	—		—		—			(20,308		)	—		(20,308		)
Dividends declared on redeemable preferred stock ($20.31 per share)	—		—		—			(1,269		)	—		(1,269		)
Net income	—		—		—			26,316			—		26,316
Issuance of stock for Resolute Energy acquisition (Note 13)	5,652		56		412,959			—			—		413,015
Unrealized change in fair value of investments, net of tax	—		—		—			—			1,149		1,149
Issuance of restricted stock awards	11		—		—			—			—		—
Common stock reacquired and retired	(10	)	—		(654		)	—			—		(654		)
Restricted stock forfeited and retired	(4	)	—		—			—			—		—
Exercise of stock options	3		—		80			—			—		80
Stock-based compensation	—		—		13,245			—			—		13,245
Balance, March 31, 2019	101,408		1,014		3,210,818			547,626			1,904		3,761,362
Dividends paid on stock awards subsequently forfeited	—		—		1			4			—		5
Dividends declared on common stock ($0.20 per share)	—		—		—			(20,330		)	—		(20,330		)
Dividends declared on redeemable preferred stock ($20.31 per share)	—		—		—			(1,270		)	—		(1,270		)
Net income	—		—		—			109,309			—		109,309
Unrealized change in fair value of investments, net of tax	—		—		—			—			304		304
Issuance of restricted stock awards	54		1		(1		)	—			—		—
Restricted stock forfeited and retired	(4	)	—		—			—			—		—
Exercise of stock options	15		—		594			—			—		594
Stock-based compensation	—		—		11,919			—			—		11,919
Balance, June 30, 2019	101,473		$	1,015	$	3,223,331		$	635,339		$	2,208	$	3,861,893

See accompanying Notes to Condensed Consolidated Financial Statements.

7

CIMAREX ENERGY CO.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands)

(Unaudited)

					Additional Paid-in Capital			Retained Earnings (Accumulated Deficit)			Accumulated Other Comprehensive Income			Total Stockholders’ Equity
	Common Stock
	Shares		Amount
Balance, December 31, 2017	95,437		$	954	$	2,764,384		$	(199,259	)	$	2,199		$	2,568,278
Dividends paid on stock awards subsequently forfeited	—		—		3			4			—			7
Dividends declared on common stock ($0.16 per share)	—		—		(15,271		)	—			—			(15,271		)
Net income	—		—		—			186,318			—			186,318
Unrealized change in fair value of investments, net of tax	—		—		—			—			(190		)	(190		)
Issuance of restricted stock awards	2		—		—			—			—			—
Common stock reacquired and retired	(3	)	—		(305		)	—			—			(305		)
Restricted stock forfeited and retired	(7	)	—		—			—			—			—
Exercise of stock options	4		—		345			—			—			345
Stock-based compensation	—		—		12,411			—			—			12,411
Balance, March 31, 2018	95,433		954		2,761,567			(12,937		)	2,009			2,751,593
Dividends paid on stock awards subsequently forfeited	—		—		26			13			—			39
Dividends declared on common stock ($0.16 per share)	—		—		21			(15,262		)	—			(15,241		)
Net income	—		—		—			140,997			—			140,997
Unrealized change in fair value of investments, net of tax	—		—		—			—			192			192
Issuance of restricted stock awards	27		—		—			—			—			—
Common stock reacquired and retired	(5	)	—		(641		)	—			—			(641		)
Restricted stock forfeited and retired	(75	)	—		—			—			—			—
Exercise of stock options	13		—		904			—			—			904
Stock-based compensation	—		—		8,655			—			—			8,655
Balance, June 30, 2018	95,393		$	954	$	2,770,532		$	112,811		$	2,201		$	2,886,498

See accompanying Notes to Condensed Consolidated Financial Statements.

8

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

1. BASIS OF PRESENTATION

Cimarex Energy Co. (“Cimarex,” “we,” or “us”), a Delaware corporation, is an independent oil and gas exploration and production company. Our operations are mainly located in Texas, Oklahoma, and New Mexico. 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, 2018.

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 2019 financial statement presentation.

On March 1, 2019, we acquired Resolute Energy Corporation (“Resolute”) in a cash and stock transaction. The results of Resolute’s operations have been included in our consolidated financial statements since the March 1, 2019 acquisition date. See Note 13 for more information on this transaction.

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, the estimation of future abandonment obligations used in recording asset retirement obligations, and the assessment of goodwill. Estimates and judgments also are required in determining allowances for doubtful accounts, impairments of unproved properties and other assets, valuation of deferred tax assets, fair value measurements, and contingencies.

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 estimated selling prices in the ordinary course of business, less reasonably predictable costs of 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. The calculated ceiling limitation is not intended to be indicative of the fair market value of our proved reserves or future results.

9

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

We did not recognize a ceiling test impairment during the three and six months ended June 30, 2019 and 2018 because the net capitalized cost of our oil and gas properties, as adjusted for income taxes, did not exceed the ceiling limitation. However, at June 30, 2019, a decline in the value of our ceiling limitation of approximately 4% or more would have resulted in an impairment. If pricing conditions deteriorate, including the further widening of local market basis differentials, or if there is a negative impact on one or more of the other components of the calculation, we may incur full cost ceiling test impairments in future quarters. 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.

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, 2019, 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.

Our gas and NGLs are sold under a limited number of contract structure types common in our industry. Under these contracts the gas and its components, including NGLs, may be sold to a single purchaser or the residue gas and NGLs may be sold to separate purchasers. Regardless of the contract structure type, the terms of these contracts compensate us for the value of the residue gas and NGLs at current market prices for each product. However, depending on the contract structure type, certain transportation, processing, and other charges may be deducted against the prices received for the product. Our oil typically is sold at specific delivery points under contract terms that also are common in our industry.

Gas Gathering

When we transport and/or process 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 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 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.

10

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

Lease Accounting

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”).  The FASB subsequently issued various ASUs which provided additional implementation guidance. Topic 842 requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for a period of time. The scope of Topic 842 excludes leases to explore for or use minerals, oil, natural gas, and similar nonregenerative resources. We adopted Topic 842 effective January 1, 2019, using the modified retrospective method applied to all leases that existed on that date, which resulted in the recognition of lease liabilities of $276.9 million and right-of-use assets of $265.0 million. In connection with adoption we made use of the following practical expedients, which are provided in Topic 842:

• a package of practical expedients to not reassess: 1) whether expired or existing contracts are or contain a lease, 2) lease classification for expired or existing leases, and 3) initial direct costs for existing leases;

• an election not to apply the recognition requirements in Topic 842 to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise);

• a practical expedient that permits combining lease and nonlease components in a contract and accounting for the combination as a lease (elected by asset class); and

• a practical expedient to not reassess certain land easements in existence prior to January 1, 2019.

2. LONG-TERM DEBT

Long-term debt at June 30, 2019 and December 31, 2018 consisted of the following:

	June 30, 2019							December 31, 2018
(in thousands)	Principal		Unamortized Debt Issuance Costs and Discounts (1)			Long-term Debt, net		Principal		Unamortized Debt Issuance Costs and Discount (1)			Long-term Debt, net
4.375% Notes due 2024	$	750,000	$	(3,982	)	$	746,018	$	750,000	$	(4,439	)	$	745,561
3.90% Notes due 2027	750,000		(6,651		)	743,349		750,000		(7,007		)	742,993
4.375% Notes due 2029	500,000		(5,137		)	494,863		—		—			—
	$	2,000,000	$	(15,770	)	$	1,984,230	$	1,500,000	$	(11,446	)	$	1,488,554

________________________________________

(1) At June 30, 2019, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.1 million and $1.5 million, respectively. At December 31, 2018, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.4 million and $1.6 million, respectively. At June 30, 2019, the unamortized debt issuance costs and discount related to the 4.375% Notes due 2029 were $4.5 million and $0.7 million, respectively. The 4.375% Notes due 2024 were issued at par.

11

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

Bank Debt

On February 5, 2019, we entered into an Amended and Restated Credit Agreement for our senior unsecured revolving credit facility (“Credit Facility”). Among other things, the amended and restated credit facility increased the aggregate commitments to $1.25 billion with an option for us to increase the aggregate commitments to $1.5 billion, and extended the maturity date to February 5, 2024. As of June 30, 2019, 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. During the three months ended June 30, 2019, we borrowed and repaid an aggregate of $528.0 million on the Credit Facility to meet cash requirements as needed.

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-capital ratio of no greater than 65%. As of June 30, 2019, we were in compliance with all of the financial covenants.

At June 30, 2019 and December 31, 2018, we had $4.6 million and $2.2 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. We incurred $3.0 million in additional debt issuance costs in amending our Credit Facility.

Senior Notes

On March 8, 2019, we issued $500 million aggregate principal amount of 4.375% senior unsecured notes due March 15, 2029 at 99.862% of par to yield 4.392% per annum.  We received $494.7 million in net cash proceeds, after deducting underwriters’ fees, discount, and debt issuance costs.  The notes bear an annual interest rate of 4.375% and interest is payable semiannually on March 15 and September 15, with the first payment due September 15, 2019.  We used the net proceeds to repay borrowings that were outstanding under our Credit Facility that were used to help fund the Resolute acquisition on March 1, 2019. 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 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 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, 2019.

12

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(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, 2019, we have entered into oil and gas collars, oil basis swaps, oil and gas fixed price swaps, and sold oil calls. 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. Under our fixed price swaps, we receive the difference between the fixed price and the published index price if the published index price is below the fixed price and we pay the difference between the fixed price and the published index price if the published index price is above the fixed price. Under our sold oil calls, we pay the difference between the fixed price and the published index price if the published index price is above the fixed price. The following tables summarize our outstanding derivative contracts as of June 30, 2019:

Oil Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		3,312,000		2,576,000		5,888,000
Weighted Avg Price - Floor	$	—	$	—	$	54.28	$	55.50	$	54.81
Weighted Avg Price - Ceiling	$	—	$	—	$	67.88	$	68.36	$	68.09
2020:
WTI (1)
Volume (Bbls)	1,820,000		1,092,000		368,000		368,000		3,648,000
Weighted Avg Price - Floor	$	54.90	$	51.50	$	50.00	$	50.00	$	52.89
Weighted Avg Price - Ceiling	$	68.49	$	63.59	$	62.15	$	62.15	$	65.74

________________________________________

(1) The index price for these collars is West Texas Intermediate (“WTI”) as quoted on the New York Mercantile Exchange (“NYMEX”).

13

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

Gas Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
PEPL (1)
Volume (MMBtu)	—		—		12,880,000		10,120,000		23,000,000
Weighted Avg Price - Floor	$	—	$	—	$	1.93	$	1.92	$	1.92
Weighted Avg Price - Ceiling	$	—	$	—	$	2.32	$	2.36	$	2.33
Perm EP (2)
Volume (MMBtu)	—		—		8,280,000		5,520,000		13,800,000
Weighted Avg Price - Floor	$	—	$	—	$	1.46	$	1.38	$	1.43
Weighted Avg Price - Ceiling	$	—	$	—	$	1.76	$	1.71	$	1.74
Waha (3)
Volume (MMBtu)	—		—		5,520,000		5,520,000		11,040,000
Weighted Avg Price - Floor	$	—	$	—	$	1.48	$	1.48	$	1.48
Weighted Avg Price - Ceiling	$	—	$	—	$	1.82	$	1.82	$	1.82
2020:
PEPL (1)
Volume (MMBtu)	7,280,000		4,550,000		1,840,000		1,840,000		15,510,000
Weighted Avg Price - Floor	$	1.93	$	1.91	$	1.85	$	1.85	$	1.91
Weighted Avg Price - Ceiling	$	2.36	$	2.28	$	2.31	$	2.31	$	2.32
Perm EP (2)
Volume (MMBtu)	3,640,000		2,730,000		1,840,000		1,840,000		10,050,000
Weighted Avg Price - Floor	$	1.40	$	1.40	$	1.35	$	1.35	$	1.38
Weighted Avg Price - Ceiling	$	1.79	$	1.82	$	1.66	$	1.66	$	1.75
Waha (3)
Volume (MMBtu)	4,550,000		2,730,000		—		—		7,280,000
Weighted Avg Price - Floor	$	1.50	$	1.57	$	—	$	—	$	1.53
Weighted Avg Price - Ceiling	$	1.87	$	1.97	$	—	$	—	$	1.91

________________________________________

(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.

14

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

Oil Basis Swaps	First Quarter		Second Quarter		Third Quarter			Fourth Quarter			Total
2019:
WTI Midland (1)
Volume (Bbls)	—		—		3,266,000			3,266,000			6,532,000
Weighted Avg Differential (2)	$	—	$	—	$	(7.36	)	$	(6.32	)	$	(6.84	)
2020:
WTI Midland (1)
Volume (Bbls)	2,093,000		1,365,000		736,000			736,000			4,930,000
Weighted Avg Differential (2)	$	0.16	$	0.19	$	0.71		$	0.71		$	0.33

________________________________________

(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 Swaps	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		460,000		460,000		920,000
Weighted Avg Price	$	—	$	—	$	64.54	$	64.54	$	64.54

________________________________________

(1) The fixed price on these swaps is NYMEX WTI.

Gas Swaps	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
Henry Hub (1)
Volume (MMBtu)	—		—		3,220,000		3,220,000		6,440,000
Weighted Avg Price	$	—	$	—	$	3.00	$	3.00	$	3.00

________________________________________

(1) The fixed price on these swaps is NYMEX Henry Hub.

Sold Oil Calls	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		337,640		337,640		675,280
Weighted Avg Call Price	$	—	$	—	$	64.36	$	64.36	$	64.36

________________________________________

(1) The index on these sold calls is NYMEX WTI.

15

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

The following table summarizes our derivative contracts entered into subsequent to June 30, 2019 through August 1, 2019:

Oil Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI
Volume (Bbls)	—		—		368,000		368,000		736,000
Wtd Avg Price - Floor	$	—	$	—	$	50.00	$	50.00	$	50.00
Wtd Avg Price - Ceiling	$	—	$	—	$	63.45	$	63.45	$	63.45
2020:
WTI
Volume (Bbls)	364,000		364,000		368,000		368,000		1,464,000
Wtd Avg Price - Floor	$	50.00	$	50.00	$	50.00	$	50.00	$	50.00
Wtd Avg Price - Ceiling	$	63.45	$	63.45	$	63.45	$	63.45	$	63.45

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 (Gain) loss on derivative instruments, net for the periods indicated.

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
(Increase) decrease in fair value of derivative instruments, net:
Gas contracts	$	(6,370	)	$	14,566		$	(16,216	)	$	2,777
Oil contracts	(28,161		)	(397		)	88,086			(5,156		)
	(34,531		)	14,169			71,870			(2,379		)
Cash (receipts) payments on derivative instruments, net:
Gas contracts	(21,176		)	(9,918		)	(17,412		)	(15,037		)
Oil contracts	14,939			17,448			20,226			34,956
	(6,237		)	7,530			2,814			19,919
(Gain) loss on derivative instruments, net	$	(40,768	)	$	21,699		$	74,684		$	17,540

16

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(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, 2019 and December 31, 2018, as well as the potential effect of netting arrangements on our recognized derivative asset and liability amounts.

		June 30, 2019
(in thousands)	Balance Sheet Location	Asset			Liability
Oil contracts	Current assets — Derivative instruments	$	23,060		$	—
Gas contracts	Current assets — Derivative instruments	19,897			—
Oil contracts	Non-current assets — Derivative instruments	613			—
Oil contracts	Current liabilities — Derivative instruments	—			50,056
Oil contracts	Non-current liabilities — Derivative instruments	—			171
Gas contracts	Non-current liabilities — Derivative instruments	—			669
Total gross amounts presented in the balance sheet		43,570			50,896
Less: gross amounts not offset in the balance sheet		(23,966		)	(23,966		)
Net amount		$	19,604		$	26,930
		December 31, 2018
(in thousands)	Balance Sheet Location	Asset			Liability
Oil contracts	Current assets — Derivative instruments	$	94,240		$	—
Gas contracts	Current assets — Derivative instruments	7,699			—
Oil contracts	Non-current assets — Derivative instruments	9,246			—
Oil contracts	Current liabilities — Derivative instruments	—			23,378
Gas contracts	Current liabilities — Derivative instruments	—			4,249
Oil contracts	Non-current liabilities — Derivative instruments	—			311
Gas contracts	Non-current liabilities — Derivative instruments	—			1,956
Total gross amounts presented in the balance sheet		111,185			29,894
Less: gross amounts not offset in the balance sheet		(29,894		)	(29,894		)
Net amount		$	81,291		$	—

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.

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 (exit price). The FASB 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

17

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

liabilities. Level 2 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability.

The following table provides fair value measurement information for certain assets and liabilities as of June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
(in thousands)	Book Value			Fair Value			Book Value			Fair Value
Financial Assets (Liabilities):
4.375% Notes due 2024	$	(750,000	)	$	(793,913	)	$	(750,000	)	$	(744,578	)
3.90% Notes due 2027	$	(750,000	)	$	(769,643	)	$	(750,000	)	$	(701,273	)
4.375% Notes due 2029	$	(500,000	)	$	(530,535	)	$	—		$	—
Derivative instruments — assets	$	43,570		$	43,570		$	111,185		$	111,185
Derivative instruments — liabilities	$	(50,896	)	$	(50,896	)	$	(29,894	)	$	(29,894	)

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, 2019 were accrued operating expenses (e.g. production, transportation, and gathering expenses) of approximately $82.8 million. Included in “Accrued liabilities — Other” at December 31, 2018 were: (i) accrued operating expenses of approximately $69.1 million, (ii) accrued general and administrative, primarily payroll-related, costs of approximately $47.4 million, and (iii) an accrual of approximately $35.8 million representing the amount by which checks issued, but not yet presented to our banks, exceeded balances in applicable bank accounts.

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.

We routinely assess the recoverability of all material accounts receivable to determine their collectability. We accrue a reserve to the allowance for doubtful accounts when it is probable that a receivable will not be collected and the amount of the reserve may be reasonably estimated. At June 30, 2019 and December 31, 2018, the allowance for doubtful accounts was $3.2 million and $2.7 million, respectively.

18

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

5. CAPITAL STOCK

Authorized capital stock consists of 200 million shares of common stock and 15 million shares of preferred stock. At June 30, 2019, there were 101.5 million shares of common stock outstanding.

From the 15 million shares of preferred stock authorized, our Board of Directors created a series of preferred stock designated as 8.125% Series A Cumulative Perpetual Convertible Preferred Stock and authorized 62.5 thousand shares. In March 2019, in conjunction with the Resolute acquisition (see Note 13), we issued 62.5 thousand shares of 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, par value $0.01 per share (the “Convertible Preferred Stock”). Holders of the Convertible Preferred Stock are entitled to receive, when, as, and if declared by the Board out of funds of Cimarex legally available for payment, cumulative cash dividends at the annual rate of 8.125% of each share’s liquidation preference of $1,000. Dividends on the preferred stock are payable quarterly in arrears and accumulate from the most recent date as to which dividends have been paid. In the event of any liquidation, winding up, or dissolution of Cimarex, whether voluntary or involuntary, each holder will be entitled to receive in respect of its shares and to be paid out of the assets of Cimarex legally available for distribution to its stockholders, after satisfaction of liabilities to Cimarex’s creditors and any senior stock (of which there is currently none) and before any payment or distribution is made to holders of junior stock (including common stock), the liquidation preference of $1,000 per share, with the total liquidation preference being $62.5 million in the aggregate. Each holder has the right at any time, at its option, to convert any or all of such holder’s shares of Convertible Preferred Stock at an initial conversion rate of 8.0421 shares of fully paid and nonassessable shares of our common stock and $471.40 in cash per share of Convertible Preferred Stock. Additionally, at any time on or after October 15, 2021, we shall have the right, at our option, if the closing sale price of our common stock meets certain criteria, to elect to cause all, and not part, of the outstanding shares of Convertible Preferred Stock to be automatically converted into that number of shares of Cimarex common stock for each share of Convertible Preferred Stock equal to the conversion rate in effect on the mandatory conversion date as such terms are defined in the Certificate of Designations for the Convertible Preferred Stock and $471.40 in cash per share of Convertible Preferred Stock. As a result of the cash redemption features included in the Convertible Preferred Stock conversion option, with such conversion not solely within our control, the instruments are classified as Redeemable preferred stock in temporary equity on the Condensed Consolidated Balance Sheet.

Dividends

Common Stock

In May 2019, our Board of Directors declared a cash dividend of $0.20 per share of common stock. The dividend is payable on or before August 30, 2019 to stockholders of record on August 15, 2019. 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 $20.3 million dividend declared during the second quarter 2019 was recorded as a reduction of retained earnings and is included as a payable in “Accrued liabilities — Other” on the Condensed Consolidated Balance Sheet. Nonforfeitable dividends paid on stock awards that subsequently forfeit are reclassified out of retained earnings or additional paid-in capital, as applicable, to stock compensation expense in the period in which the 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 2019, our Board of Directors declared a cash dividend of $20.31 per share of Convertible Preferred Stock. The dividend was paid in July to stockholders of record on July 1, 2019. The $1.3 million dividend declared during the second quarter 2019 was recorded as a reduction of retained earnings and is included as a payable in “Accrued liabilities — Other” on the Condensed Consolidated Balance Sheet.

19

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(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)	2019			2018			2019			2018
Restricted stock awards:
Performance stock awards	$	5,535		$	3,809		$	10,929		$	10,538
Service-based stock awards	5,993			4,247			13,224			9,319
	11,528			8,056			24,153			19,857
Stock option awards	396			637			1,018			1,254
Total stock compensation cost	11,924			8,693			25,171			21,111
Less amounts capitalized to oil and gas properties	(5,430		)	(5,598		)	(11,964		)	(11,286		)
Stock compensation expense	$	6,494		$	3,095		$	13,207		$	9,825

Periodic stock 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. The increase in total stock compensation cost in the 2019 periods as compared to the 2018 periods is primarily due to awards granted either during or subsequent to the 2018 periods and performance stock award forfeitures that occurred during the second quarter of 2018, both of which were partially offset by awards vesting prior to or during the 2019 periods. Our accounting policy is to account for forfeitures in compensation cost when they occur.

20

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

7. ASSET RETIREMENT OBLIGATIONS

We recognize the present value of the fair value of liabilities for retirement obligations associated with tangible long-lived assets in the period in which there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This liability includes costs related to the plugging and abandonment of wells, the removal of facilities and equipment, and site restorations. Subsequent to initial measurement, the asset retirement liability is accreted each period. If there is a change in the estimated cost or timing of retirement, a revision is recorded to both the asset retirement obligation and the asset retirement capitalized cost. Capitalized costs are included as a component of the depreciation and depletion calculations.

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, 2019:

(in thousands)	Six Months Ended June 30, 2019
Asset retirement obligation at January 1, 2019	$	166,904
Liabilities incurred	12,611
Liability settlements and disposals	(11,771		)
Accretion expense	3,714
Revisions of estimated liabilities	2,415
Asset retirement obligation at June 30, 2019	173,873
Less current obligation	(16,492		)
Long-term asset retirement obligation	$	157,381

For the six months ended June 30, 2019, liabilities incurred included $9.4 million for the Resolute acquisition.

21

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

8. EARNINGS PER SHARE

The calculations of basic and diluted net earnings per common share under the two-class method are presented below for the periods indicated:

	Three Months Ended June 30,
	2019						2018
(in thousands, except per share information)	Income (Numerator)			Shares (Denominator)	Per-Share Amount		Income (Numerator)			Shares (Denominator)	Per-Share Amount
Net income	$	109,309					$	140,997
Less: net income attributable to participating securities	(1,596		)				(1,892		)
Less: preferred stock dividends	(1,270		)				—
Basic earnings per share
Income available to common stockholders	106,443			99,658	$	1.07	139,105			93,728	$	1.48
Effects of dilutive securities (1)
Options	—			7			—			31
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	106,443		99,665	$	1.07	$	139,105		93,759	$	1.48

________________________________________

(1) Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings per share. Excluded from the three months ended June 30, 2019 calculation were 387.5 thousand potential common shares from the assumed exercise of employee stock options and 502.6 thousand potential common shares from the assumed conversion of the Convertible Preferred Stock. Excluded from the three months ended June 30, 2018 calculation were 292.1 thousand potential common shares from the assumed exercise of employee stock options.

22

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

	Six Months Ended June 30,
	2019						2018
(in thousands, except per share information)	Income (Numerator)			Shares (Denominator)	Per-Share Amount		Income (Numerator)			Shares (Denominator)	Per-Share Amount
Net income	$	135,625					$	327,315
Less: net income attributable to participating securities	(2,067		)				(4,546		)
Less: preferred stock dividends	(2,539		)				—
Basic earnings per share
Income available to common stockholders	131,019			97,800	$	1.34	322,769			93,713	$	3.44
Effects of dilutive securities (1)
Options	—			9			1			35
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	131,019		97,809	$	1.34	$	322,770		93,748	$	3.44

________________________________________

(1) Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings per share. Excluded from the six months ended June 30, 2019 calculation were 391.1 thousand potential common shares from the assumed exercise of employee stock options and 502.6 thousand potential common shares from the assumed conversion of the Convertible Preferred Stock. Excluded from the six months ended June 30, 2018 calculation were 295.6 thousand potential common shares from the assumed exercise of employee stock options.

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)	2019			2018			2019			2018
Current tax (benefit)	$	—		$	(717	)	$	—		$	(717	)
Deferred tax expense	34,046			42,783			42,119			99,732
	$	34,046		$	42,066		$	42,119		$	99,015
Combined federal and state effective income tax rate	23.7		%	23.0		%	23.7		%	23.2		%

At December 31, 2018, we had a U.S. net tax operating loss carryforward of approximately $1.16 billion, which will expire in tax years 2032 through 2037. We believe that the carryforward will be utilized before it expires. We also had enhanced oil recovery and marginal well credits of $3.5 million at December 31, 2018.

On March 1, 2019, the Company completed its acquisition of Resolute. For federal income tax purposes, the acquisition was a tax-free merger whereby the Company acquired carryover tax basis in Resolute’s assets and liabilities. As of March 1, 2019, the Company recorded a net deferred tax liability of $62.4 million associated with the acquired assets. The net deferred tax liability includes certain deferred tax assets net of valuation allowances. The acquired tax attributes include federal net operating loss, capital loss, and enhanced oil recovery tax credit carryforwards. The carryforwards are subject to an annual limitation under Internal Revenue Code Section 382.

23

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

At June 30, 2019, 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 2016 through 2018 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 2015 through 2018.

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 and non-deductible expenses.

10. COMMITMENTS AND CONTINGENCIES

Lease Commitments

Effective January 1, 2019, we began accounting for leases in accordance with Topic 842, which requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for periods of greater than 12 months. Prior to January 1, 2019, we accounted for leases in accordance with ASC Topic 840, Leases, under which operating leases were not recorded on the balance sheet.

Real Estate Leases

We have operating leases for office space in various locations that provide us the right to control the use of the specified office space over the term of the contract. These leases require us to make monthly “base rent” payments, as well as “additional payments” for our share of operating expenses and taxes incurred by the landlord. At our option, the terms of these leases can be renewed for varying periods, and in some cases may be terminated early at our option. As of June 30, 2019, these leases had remaining lease terms ranging from 4.9 to 7.2 years. These leases do not contain residual value guarantees, options to purchase the underlying office space, or terms or covenants that impose restrictions on our ability to pay dividends, incur debt, or enter into additional leases. We have no subleases of office space.

Lease liabilities associated with our real estate leases were recorded at the present value of the future lease payments, after considering the following:

• “Base rent” payments are considered fixed lease payments, while “additional payments” are considered variable lease payments.

• At commencement of each real estate lease we were not reasonably certain to exercise the option to renew or terminate such lease.

• The discount rate used to calculate each lease liability was based on our incremental borrowing rate, which was estimated utilizing trading metrics for our senior unsecured notes as adjusted using relevant market factors to develop a synthetic secured yield curve.

• As an accounting policy we have elected not to separate nonlease components from lease components for our real estate class of assets.

• Where applicable, we determined that the effect of accounting for the right to use land separately from other lease components would be insignificant.

Production-Related Leases

We have operating leases for equipment used in connection with our oil and gas production operations, including well-head compressors, pipeline compressors, and artificial lift mechanisms. These leases provide us the right to control the use of explicitly or implicitly identified equipment during the term of the contract. These leases often include an “evergreen” provision that allows the contract term to continue on a month-to-month basis following expiration of the initial term stated in the contract. As of June 30, 2019, these leases had remaining lease terms ranging from one month to 11.3 years. These leases require us to make monthly payments of fixed amounts, which cover the

24

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

cost of renting the equipment and, in some cases, the cost of maintaining the leased equipment. These leases do not typically require us to make variable lease payments. These leases do not contain residual value guarantees, options to purchase the underlying equipment, or terms or covenants that impose restrictions on our ability to pay dividends, incur debt, or enter into additional leases. We have no subleases of production-related equipment.

Lease liabilities associated with our production-related operating leases were recorded at the present value of the future lease payments, after considering the following:

• For leases with an evergreen provision, the term of the lease was determined to be the noncancellable period in the contract plus the period beyond the noncancellable period that we believe it is reasonably certain we will need the equipment for operational purposes, limited to the point in time at which both we and the lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty.

• The discount rate used to calculate each lease liability was based on our incremental borrowing rate, which was estimated utilizing trading metrics for our senior unsecured notes as adjusted using relevant market factors to develop a synthetic secured yield curve.

• As an accounting policy we have elected not to separate nonlease components from lease components for our production-related class of assets.

We have one finance lease, which results from a gathering agreement (the “Gathering Agreement”) on a gathering system. Under terms of the Gathering Agreement, we have the option to acquire a portion of the underlying gathering system upon termination of the Gathering Agreement. We make monthly payments under the Gathering Agreement based on the volume of oil gathered and a gathering rate per barrel, which is adjusted periodically. As of June 30, 2019, this lease had a remaining term of 6.2 years.

Exploration and Development-Related Leases

We have operating leases for equipment used in connection with our exploration and development activities, including drilling rigs, pressure pumping equipment, directional drilling tools, well-control devices, and various pieces of support equipment. These leases provide us the right to control the use of explicitly or implicitly identified equipment during the term of the contract. As of June 30, 2019, these leases had remaining lease terms of 12 months or less. These leases typically require us to make payments in amounts based on the usage of the underlying equipment. These leases do not contain residual value guarantees, options to purchase the underlying equipment, or terms or covenants that impose restrictions on our ability to pay dividends, incur debt, or enter into additional leases. We have no subleases of exploration and development-related equipment.

As an accounting policy we have elected not to apply the recognition requirements of Topic 842 to our exploration and development-related class of assets with lease terms at commencement of 12 months or less. As such, we have not recorded any lease liabilities associated with our exploration and development-related leases. In addition, as an accounting policy we have elected not to separate nonlease components from lease components for our exploration and development-related class of assets.

25

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

Balance Sheet Presentation

The following tables present the amounts and classifications of our right-of-use assets and estimated lease liabilities as of June 30, 2019:

(in thousands)	Balance Sheet Location	June 30, 2019
Operating lease right-of-use assets	Non-current assets — Fixed assets, net	$	243,089
Finance lease right-of-use asset	Non-current assets — Other assets	27,042
Total right-of-use assets		$	270,131

(in thousands)	Balance Sheet Location	June 30, 2019
Operating lease liabilities — current	Current liabilities — Operating leases	$	62,119
Operating lease liabilities — non-current	Non-current liabilities — Operating leases	191,413
Finance lease liability — current	Current liabilities — Accrued liabilities-Other	6,576
Finance lease liability — non-current	Non-current liabilities — Other liabilities	21,895
Total lease liabilities		$	282,003

Lease Cost and Cash Flows

The following table summarizes estimated total lease cost, which includes amounts recognized in income and amounts capitalized for the indicated period:

(in thousands)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease cost:
Amortization of right-of-use asset	$	1,097	$	2,193
Interest on lease liability	457		943
Operating lease cost: (1)
Production expense	3,943		7,777
Gas gathering and other expense	6,522		12,686
General and administrative expense	2,335		4,634
Short-term lease cost (2)	162,334		317,044
Total lease cost	$	176,688	$	345,277

________________________________________

(1) Operating lease cost in the table above is composed of costs incurred under real estate and production-related leases. These costs are included in the indicated captions on the Condensed Consolidated Statements of Operations.

(2) Short-term lease cost in the table above is composed of costs incurred under leases with terms of 12 months or less for right-of-use assets used in exploration and development activities. Payments under such leases are typically based on usage of the underlying right-of-use asset and, therefore, are also variable lease payments. These costs are capitalized as part of proved properties on the Condensed Consolidated Balance Sheet.

26

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

The following table summarizes estimated cash paid for our leases for the indicated period:

(in thousands)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance lease	$	1,555
Operating cash outflows from operating leases	$	25,466
Cash paid for short-term leases and variable lease payments:
Investing cash outflows from operating leases	$	309,150

During the six months ended June 30, 2019, we recognized $49.1 million in right-of-use assets in connection with new operating leases entered into during the period.

Lease Liability Maturity Analysis

The following table presents the weighted-average remaining lease terms and discount rates of our leases as of the indicated date:

	June 30, 2019
Weighted-average remaining lease term (in years):
Finance lease	6.2
Operating leases	4.5
Weighted-average discount rate:
Finance lease	6.5	%
Operating leases	4.0	%

The following table reflects the undiscounted future cash flows utilized in the calculation of the lease liabilities recorded at June 30, 2019:

	June 30, 2019
(in thousands)	Operating Leases			Finance Lease
July 1, 2019 — June 30, 2020	$	72,320		$	6,802
July 1, 2020 — June 30, 2021	64,198			5,846
July 1, 2021 — June 30, 2022	58,280			5,562
July 1, 2022 — June 30, 2023	45,166			5,279
July 1, 2023 — June 30, 2024	21,977			4,995
Remaining periods	18,814			5,469
Total undiscounted future cash flows	280,755			33,953
Less effects of discounting	(27,223		)	(5,482		)
Lease liabilities recognized	$	253,532		$	28,471

27

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

As of December 31, 2018 the following future minimum cash payments were required under leases for office space:

(in thousands)	December 31, 2018
2019	$	9,849
2020	10,790
2021	11,000
2022	11,130
2023	11,433
Remaining periods	20,831
Total future minimum lease payments	$	75,033

In addition, as of December 31, 2018, we had various contractual commitments for compressor equipment under operating lease arrangements totaling $34.8 million with lease terms expiring over 1 - 35 months.

Other Commitments

At June 30, 2019, we had estimated commitments of approximately: (i) $304.6 million to finish drilling, completing, or performing other work on wells and various other infrastructure projects in progress and (ii) $19.2 million to finish gathering system construction in progress.

At June 30, 2019, we had firm sales contracts to deliver approximately 290.7 Bcf of gas over the next 5.6 years. If we do not deliver this gas, our estimated financial commitment, calculated using the July 2019 index price, would be approximately $303.3 million. The value of this commitment will fluctuate due to price volatility and actual volumes delivered. However, we believe no financial commitment will be due based on our current proved reserves and production levels from which we can fulfill these volumetric obligations.

In connection with gas gathering and processing agreements, we have volume commitments over the next 9.5 years. If we do not deliver the committed gas or NGLs, as the case may be, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2019, would be approximately $655.2 million. However, we believe no financial commitment will be due based on our current proved reserves and production levels from which we can fulfill these volumetric obligations.

We have minimum volume delivery commitments associated with agreements to reimburse connection costs to various pipelines. If we do not deliver this gas, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2019, would be approximately $153.3 million. Of this total, we have accrued a liability of $4.6 million, representing the estimated amount we will have to pay due to insufficient forecasted volumes at particular connection points.

At June 30, 2019, we have various firm transportation agreements for gas and oil pipeline capacity with end dates ranging from 2020 - 2028 under which we will have to pay an estimated $70.5 million over the remaining terms of the agreements. These agreements were entered into to support our residue gas and oil marketing efforts, and we believe we have sufficient reserves that will utilize this firm transportation.

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

Litigation

We have various litigation matters related to the ordinary course of our business. We assess the probability of estimable amounts related to these matters in accordance with guidance established by the FASB and adjust our

28

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

accruals accordingly. 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 after consideration of current accruals.

11. SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Cash paid during the period for:
Interest (net of capitalized amounts of $19,381, $9,233, $20,121 and $9,389, respectively) (1)	$	14,396	$	22,954	$	32,984	$	23,343
Income taxes	$	1,200	$	—	$	1,206	$	—
Cash received for income tax refunds	$	335	$	717	$	336	$	718

________________________________________

(1) The six months ended June 30, 2019 includes $17.6 million in interest paid upon the redemption of Resolute’s senior notes and credit facility on March 1, 2019.

12. RELATED PARTY TRANSACTIONS

Helmerich & Payne, Inc. (“H&P”) provides contract drilling services to Cimarex. Cimarex incurred drilling costs of approximately $22.1 million and $46.6 million related to these services during the three and six months ended June 30, 2019 and $16.4 million and $40.0 million during the three and six months ended June 30, 2018. The amount incurred in 2019 is included in the short-term lease costs disclosed in Note 10. Hans Helmerich, a director of Cimarex, is Chairman of the Board of Directors of H&P.

13. ACQUISITIONS

On March 1, 2019, we completed the acquisition of Resolute Energy Corporation, an independent oil and gas company focused on the acquisition and development of unconventional oil and gas properties in the Delaware Basin area of the Permian Basin of west Texas. The principal factors considered by management in making this acquisition included: (i) our expectation that the acquired assets’ attractive returns are competitive with those in our existing portfolio, (ii) the opportunity to apply our experience and learnings from already operating in this area to generating productivity gains from the acquired properties, (iii) the ability to increase our acreage position in the Delaware Basin, and (iv) the expectation that the acquisition will be financially accretive.

We acquired 100% of the outstanding common shares and voting interests of Resolute in a cash and stock transaction. The acquisition date fair value of the consideration transferred totaled $820.3 million, which consisted of cash, common stock, and a newly created series of preferred stock (see Note 5 for more information on the preferred stock) as follows:

(in thousands)	Fair Value of Consideration Transferred
Cash	$	325,677
Common stock (5,652 shares issued)	413,015
Preferred stock (63 shares issued)	81,620
	$	820,312

The fair value of the common stock issued as part of the consideration was determined on the basis of the closing market price of Cimarex common stock on the acquisition date. The fair value of the preferred stock issued as part of the consideration was determined using a multiple probability simulation model.

29

CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

Preliminary Purchase Price Allocation

The Resolute acquisition has been accounted for as a business combination, using the acquisition method. The following table represents the preliminary allocation of the Resolute purchase price to the identifiable assets acquired and liabilities assumed based on the fair values at the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded to goodwill. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, finalization of the fair value of certain assets and liabilities, including pre-acquisition working capital balances and completion of the final Resolute tax returns that will provide the underlying tax basis of Resolute’s assets and liabilities and net operating losses. We expect to complete the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate.

The following table sets forth the preliminary purchase price allocation:

(in thousands)	March 1, 2019
Cash	$	41,236
Accounts receivable	50,739
Other current assets	13,280
Proved oil and gas properties	692,600
Unproved oil and gas properties	1,054,200
Fixed assets	5,355
Goodwill	107,341
Other assets	142
Current liabilities	(202,735		)
Long-term debt	(870,000		)
Deferred income taxes	(62,409		)
Asset retirement obligation	(9,437		)
Total identifiable net assets	$	820,312

In connection with the acquisition, we assumed, and immediately repaid, $870.0 million principal amount of long-term debt consisting of $600.0 million of senior notes and $270.0 million of credit facility borrowings. On March 1, 2019, we repaid Resolute’s credit facility borrowings, delivered a notice of optional redemption of Resolute’s senior notes for an April 1, 2019 redemption date, and irrevocably deposited with a trustee the full amount of funds to repay the aggregate outstanding senior notes principal balance plus accrued and unpaid interest, incurring a $4.3 million loss on early extinguishment of debt. The cash consideration transferred and the repayment of Resolute’s long-term debt was funded using cash on hand and borrowings on our Credit Facility. We subsequently repaid the borrowings on our Credit Facility using the net proceeds from the March 8, 2019 issuance of $500 million aggregate principal amount of 4.375% senior unsecured notes (see Note 2 for more information on our debt issuance).

Goodwill of $107.3 million has been recognized principally as a result of recording net deferred tax liabilities arising from the difference between the tax basis and the purchase price allocated to Resolute’s assets and liabilities, and anticipated opportunities for cost savings through administrative and operational synergies. Goodwill is not expected to be deductible for tax purposes.

Acquisition-related costs incurred in 2019 were $8.4 million. These costs, which are comprised primarily of advisory, legal, and other professional and consulting fees, are included in the Other operating expense, net line item on our Condensed Consolidated Statements of Operations and Comprehensive Income.

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CIMAREX ENERGY CO.

Notes to Condensed Consolidated Financial Statements

June 30, 2019

(Unaudited)

The results of Resolute’s operations have been included in our consolidated financial statements since the March 1, 2019 acquisition date. The amount of revenue and direct operating expenses resulting from the acquisition included in our Condensed Consolidated Statements of Operations and Comprehensive Income from March 1, 2019 through June 30, 2019 is $100.0 million and $21.9 million, respectively.

Pro Forma Financial Information

The following supplemental pro forma information for the three and six month periods ended June 30, 2019 and 2018 has been prepared to give effect to the Resolute acquisition as if it had occurred on January 1, 2018. The information below reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including (i) the depletion of the combined company’s proved oil and gas properties, (ii) the capitalization of interest expense, and (iii) the estimated tax impacts of the pro forma adjustments. Additionally, pro forma earnings were adjusted to exclude acquisition-related costs incurred by Cimarex of $8.4 million and transaction-related costs incurred by Resolute of $60.0 million. The pro forma results of operations do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by Cimarex to integrate the Resolute assets. The pro forma financial data has not been adjusted to reflect any other acquisitions or dispositions made during the periods presented as their results were not deemed material.

The pro forma information is not necessarily indicative of the results that might have occurred had the transaction actually taken place on January 1, 2018 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities, and other factors.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Revenue	$	546,463	$	625,332	$	1,176,556	$	1,263,410
Net income	$	109,365	$	148,486	$	121,909	$	335,544
Net income per share:
Basic	$	1.07	$	1.48	$	1.18	$	3.33
Diluted	$	1.07	$	1.47	$	1.18	$	3.33

31

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 entirely located in the United States, mainly in Oklahoma, Texas, and New Mexico. 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 consists of Oklahoma and the Texas Panhandle.

Our principal business objective is to increase shareholder value through the profitable long-term 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 so that we can reinvest in exploration and development opportunities and provide cash returns to shareholders through dividends. We consider merger and acquisition opportunities that enhance our competitive position and we occasionally divest non-core assets.

On March 1, 2019, we completed the acquisition of Resolute Energy Corporation (“Resolute”), an independent oil and gas company focused on the acquisition and development of unconventional oil and gas properties in the Delaware Basin area of the Permian Basin of west Texas. The principal factors considered by management in making this acquisition included: (i) our expectation that the acquired assets’ attractive returns are competitive with those in our existing portfolio, (ii) the opportunity to apply our experience and learnings from already operating in this area to generating productivity gains from the acquired properties, (iii) the ability to increase our acreage position in the Delaware Basin, and (iv) the expectation that the acquisition will be financially accretive. The acquisition date fair value of the consideration transferred totaled $820.3 million, which consisted of cash, common stock, and preferred stock (see Note 13 to the Condensed Consolidated Financial Statements for more information on the acquisition).

We believe that detailed technical analysis, operational focus, and a disciplined capital investment process mitigate risk and position 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.

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.

As demonstrated in the table below, our company-wide average realized prices for the three and six months ended June 30, 2019 as compared to the same periods in 2018 have declined for all products. In the case of oil sales, these decreases result from a combination of declining NYMEX prices in the 2019 periods and differentials in our Mid-Continent region, which deteriorated in the 2019 periods, and differentials in our Permian Basin region, which improved in the second quarter of 2019 but worsened in the six months ended June 30, 2019. In the case of gas sales, these decreases are driven largely by differentials in our Permian Basin region, which deteriorated significantly in the 2019 periods, partially offset by differentials in our Mid-Continent region, which improved in the 2019 periods.

32

	Three Months Ended June 30,						Variance Between 2019 / 2018	Six Months Ended June 30,						Variance Between 2019 / 2018
	2019			2018				2019			2018
Average NYMEX price
Oil — per barrel	$	59.82		$	67.88		(12)%	$	57.36		$	65.37		(12)%
Gas — per Mcf	$	2.64		$	2.80		(6)%	$	2.90		$	2.90		—%
Average realized price
Oil — per barrel	$	54.24		$	60.99		(11)%	$	51.64		$	60.45		(15)%
Gas — per Mcf	$	0.50		$	1.65		(70)%	$	1.19		$	1.96		(39)%
Average price differential
Oil — per barrel	$	(5.58	)	$	(6.89	)	(19)%	$	(5.72	)	$	(4.92	)	16%
Gas — per Mcf	$	(2.14	)	$	(1.15	)	86%	$	(1.71	)	$	(0.94	)	82%

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
	2019						2018
	Second Quarter			First Quarter			Fourth Quarter			Third Quarter			Second Quarter			First Quarter
Oil
Permian Basin	$	(5.80	)	$	(6.90	)	$	(11.64	)	$	(14.34	)	$	(8.05	)	$	(3.12	)
Mid-Continent	$	(4.39	)	$	(2.17	)	$	(2.33	)	$	(1.08	)	$	(2.18	)	$	(2.34	)
Gas
Permian Basin	$	(3.10	)	$	(1.91	)	$	(2.21	)	$	(1.25	)	$	(1.31	)	$	(0.78	)
Mid-Continent	$	(0.86	)	$	(0.46	)	$	(0.83	)	$	(0.94	)	$	(1.03	)	$	(0.70	)

Pipeline expansion projects in the Permian Basin are expected to ease capacity constraints as they come online over the next few years, which is reflected in the current futures markets that show narrowing differentials. However, if pipeline constraints remain because expansion projects are delayed or canceled, production increases faster than capacity increases, pipeline disruptions or other reasons, higher differentials will persist or 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 RESULTS OF OPERATIONS Revenues below for further information regarding our realized commodity prices.

If the trend of decreasing market prices and significant basis differentials continues, coupled with continued exploration and development capital spending, we will incur a ceiling test impairment by year-end. At June 30, 2019, a decline in the value of our ceiling limitation of approximately 4% or more would have resulted in an impairment.

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, 2018, 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.

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Summary of Operating and Financial Results for the Six Months Ended June 30, 2019 Compared to the Six Months Ended June 30, 2018:

• Completed the acquisition of Resolute Energy Corporation. Resolute’s results are included in our financial statements since the March 1, 2019 closing date.

• Total production volumes increased 28% to 266.9 MBOE per day.

• Oil volumes increased 28% to 81.4 MBbls per day.

• Gas volumes increased 21% to 652.5 MMcf per day.

• NGL volumes increased 37% to 76.7 MBbls per day.

• Total production revenue remained flat at $1.11 billion.

• Cash flow provided by operating activities decreased 6% to $664.1 million.

• Exploration and development expenditures increased 1% to $693.0 million.

• Net income was $135.6 million, or $1.34 per diluted share, for the first six months of 2019, as compared to net income of $327.3 million, or $3.44 per diluted share, for the first six months of 2018.

RESULTS OF OPERATIONS

Three and Six Months Ended June 30, 2019 vs. Three and Six Months Ended June 30, 2018

Revenues

Our revenues are derived from sales of our oil, gas, and NGL production.  Increases or decreases in our revenues, profitability, and future production growth are highly dependent on the commodity prices we receive.  Prices are market driven and we expect that future prices will continue to fluctuate due to supply and demand factors, availability of transportation, seasonality, and geopolitical and economic factors. See QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK for more information regarding the sensitivity of our revenues to price fluctuations.

Production volumes were higher for all products during the three and six months ended June 30, 2019 as compared to the three and six months ended June 30, 2018, while realized prices were lower. Our acquisition of Resolute and ongoing completion of new wells have increased our volumes. However, lower market prices and large basis differentials, both of which are out of our control, have lowered our realized prices and, therefore, our revenue. In addition, transportation and processing charges for sales contracts that transfer control of the product at the wellhead versus the tailgate of processing plants are reflected as reductions to revenue under Accounting Standards Codification 606, Revenue from Contracts with Customers (“ASC 606”) and, therefore, negatively impact our realized prices. The largest sales contract we acquired with Resolute is this type of contract and sales volumes under legacy Cimarex contracts structured this way have increased. See below “Transportation, Processing, and Other Operating” for additional information. Our revenue decreased 1%, or $6.6 million, during the three months ended June 30, 2019 as compared to the three months ended June 30, 2018, and increased less than 1%, or $5.2 million, during the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. The following tables show our production revenue for the periods indicated as well as the change in revenue due to changes in volumes and prices.

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	Three Months Ended June 30,				Variance Between 2019 / 2018				Price/Volume Variance
Production Revenue (in thousands)	2019		2018						Price			Volume		Total
Oil sales	$	411,766	$	342,184	$	69,582		20%	$	(51,247	)	$	120,829	$	69,582
Gas sales	30,362		80,787		(50,425		)	(62)%	(69,681		)	19,256		(50,425		)
NGL sales	95,682		121,415		(25,733		)	(21)%	(67,352		)	41,619		(25,733		)
	$	537,810	$	544,386	$	(6,576	)	(1)%	$	(188,280	)	$	181,704	$	(6,576	)

	Six Months Ended June 30,				Variance Between 2019 / 2018				Price/Volume Variance
Production Revenue (in thousands)	2019		2018						Price			Volume		Total
Oil sales	$	761,072	$	693,907	$	67,165		10%	$	(129,855	)	$	197,020	$	67,165
Gas sales	140,338		190,508		(50,170		)	(26)%	(90,943		)	40,773		(50,170		)
NGL sales	203,621		215,412		(11,791		)	(5)%	(92,295		)	80,504		(11,791		)
	$	1,105,031	$	1,099,827	$	5,204		—%	$	(313,093	)	$	318,297	$	5,204

The table below presents our production volumes by region.

	Three Months Ended June 30,		Six Months Ended June 30,
Production Volumes	2019	2018	2019	2018
Oil (Bbls per day)
Permian Basin	70,669	48,797	67,835	49,318
Mid-Continent	12,623	12,473	13,419	13,841
Other	138	381	179	263
	83,430	61,651	81,433	63,422
Gas (MMcf per day)
Permian Basin	379.3	240.5	360.1	239.2
Mid-Continent	285.5	297.0	291.3	296.2
Other	1.0	2.0	1.1	1.7
	665.8	539.5	652.5	537.1
NGL (Bbls per day)
Permian Basin	54,813	32,865	50,567	28,817
Mid-Continent	25,496	26,894	26,060	26,927
Other	53	98	53	66
	80,362	59,857	76,680	55,810
Total (BOE per day)
Permian Basin	188,703	121,744	178,413	118,002
Mid-Continent	85,696	88,864	88,028	90,142
Other	368	816	427	608
	274,767	211,424	266,868	208,752

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The table below presents our production volumes by commodity, our average realized commodity prices, and certain major U.S. index prices.  The sale of our Permian Basin oil production is typically tied to the WTI Midland benchmark price and the sale of our Mid-Continent oil production is typically tied to the WTI Cushing benchmark price.  During the six months ended June 30, 2019, approximately 83% of our oil production was in the Permian Basin, up from approximately 78% during the six months ended June 30, 2018. Our realized prices do not include settlements of commodity derivative contracts.

	Three Months Ended June 30,						Variance Between 2019 / 2018	Six Months Ended June 30,						Variance Between 2019 / 2018
	2019			2018				2019			2018
Oil
Total volume — MBbls	7,592			5,610			35%	14,739			11,479			28%
Total volume — MBbls per day	83.4			61.7			35%	81.4			63.4			28%
Percentage of total production	30		%	29		%		30		%	30		%
Average realized price — per barrel	$	54.24		$	60.99		(11)%	$	51.64		$	60.45		(15)%
Average WTI Midland price — per barrel	$	57.72		$	62.76		(8)%	$	54.35		$	63.01		(14)%
Average WTI Cushing price — per barrel	$	59.82		$	67.88		(12)%	$	57.36		$	65.37		(12)%
Gas
Total volume — MMcf	60,592			49,094			23%	118,108			97,219			21%
Total volume — MMcf per day	665.8			539.5			23%	652.5			537.1			21%
Percentage of total production	41		%	43		%		41		%	43		%
Average realized price — per Mcf (1)	$	0.50		$	1.65		(70)%	$	1.19		$	1.96		(39)%
Average Henry Hub price — per Mcf	$	2.64		$	2.80		(6)%	$	2.90		$	2.90		—%
NGL
Total volume — MBbls	7,313			5,447			34%	13,879			10,102			37%
Total volume — MBbls per day	80.4			59.9			34%	76.7			55.8			37%
Percentage of total production	29		%	28		%		29		%	27		%
Average realized price — per barrel (2)	$	13.08		$	22.29		(41)%	$	14.67		$	21.32		(31)%
Total
Total production — MBOE	25,004			19,240			30%	48,303			37,784			28%
Total production — MBOE per day	274.8			211.4			30%	266.9			208.8			28%
Average realized price — per BOE (3)	$	21.51		$	28.30		(24)%	$	22.88		$	29.11		(21)%

________________________________________

The average realized gas, NGL, and total prices shown in the table above reflect the deduction of certain transportation, processing, and other costs as reductions of revenue under ASC 606, which reduced the average realized prices as follows:

(1) The average realized gas prices were reduced by $0.25 per Mcf, $0.08 per Mcf, $0.21 per Mcf, and $0.07 per Mcf for the three months ended June 30, 2019 and 2018 and the six months ended June 30, 2019 and 2018, respectively.

(2) The average realized NGL prices were reduced by $1.29 per barrel, $0.68 per barrel, $1.29 per barrel, and $1.52 per barrel for the three months ended June 30, 2019 and 2018 and the six months ended June 30, 2019 and 2018, respectively.

(3) The average realized total prices were reduced by $0.99 per BOE, $0.39 per BOE, $0.88 per BOE, and $0.59 per BOE for the three months ended June 30, 2019 and 2018 and the six months ended June 30, 2019 and 2018, respectively.

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Other revenues

We transport, process, and market some third-party gas that is associated with our equity gas.  We market and sell gas for other working interest owners under short-term agreements and may earn a fee for such services.  The table below reflects income from third-party gas gathering and processing and our net marketing margin for marketing third-party gas. 

	Three Months Ended June 30,					Variance Between 2019 / 2018			Six Months Ended June 30,					Variance Between 2019 / 2018
Gas Gathering and Marketing Revenues (in thousands)	2019			2018					2019			2018
Gas gathering and other	$	9,769		$	11,810	$	(2,041	)	$	20,031		$	23,262	$	(3,231	)
Gas marketing	$	(1,116	)	$	78	$	(1,194	)	$	(1,642	)	$	319	$	(1,961	)

Fluctuations in revenues from gas gathering and gas marketing activities are a function of increases and decreases in volumes, commodity prices, and gathering rate charges.

Operating Costs and Expenses

Costs associated with producing oil and gas are substantial.  Among other factors, some of these costs vary with commodity prices, some trend with the volume of production, some are a function of the number of wells we own, some depend on the prices charged by service companies, and some fluctuate based on a combination of the foregoing. 

Total operating costs and expenses for the three months ended June 30, 2019 were higher by 9%, or $33.6 million, compared to the three months ended June 30, 2018.  The primary reasons for the increase were: (i) the $69.9 million increase in depreciation, depletion, and amortization, (ii) the $13.1 million increase in taxes other than income, and (iii) the $8.5 million increase in production expense, partially offset by the $62.5 million increase in net gains on derivative instruments.

	Three Months Ended June 30,					Variance Between 2019 / 2018			Per BOE
Operating Costs and Expenses (in thousands, except per BOE)	2019			2018					2019		2018
Depreciation, depletion, and amortization	$	213,327		$	143,388	$	69,939		$	8.53	$	7.45
Asset retirement obligation	2,157			2,053		104			$	0.09	$	0.11
Production	87,726			79,215		8,511			$	3.51	$	4.12
Transportation, processing, and other operating	48,331			51,933		(3,602		)	$	1.93	$	2.70
Gas gathering and other	13,605			9,467		4,138			$	0.54	$	0.49
Taxes other than income	41,033			27,930		13,103			$	1.64	$	1.45
General and administrative	24,911			19,739		5,172			$	1.00	$	1.03
Stock compensation	6,494			3,095		3,399			$	0.26	$	0.16
(Gain) loss on derivative instruments, net	(40,768		)	21,699		(62,467		)	N/A		N/A
Other operating expense, net	590			5,252		(4,662		)	N/A		N/A
	$	397,406		$	363,771	$	33,635

Total operating costs and expenses for the six months ended June 30, 2019 were higher by 36%, or $246.1 million, compared to the six months ended June 30, 2018.  The primary reasons for the increase were due to the following increases: (i) $127.5 million in depreciation, depletion, and amortization, (ii) $57.1 million in net losses on derivative instruments, (iii) $16.6 million in taxes other than income, (iv) $14.5 million in production expense, and (v) $10.9 million in general and administrative.

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	Six Months Ended June 30,				Variance Between 2019 / 2018		Per BOE
Operating Costs and Expenses (in thousands, except per BOE)	2019		2018				2019		2018
Depreciation, depletion, and amortization	$	403,744	$	276,247	$	127,497	$	8.36	$	7.31
Asset retirement obligation	4,206		3,113		1,093		$	0.09	$	0.08
Production	164,959		150,486		14,473		$	3.42	$	3.98
Transportation, processing, and other operating	101,939		97,098		4,841		$	2.11	$	2.57
Gas gathering and other	25,925		19,290		6,635		$	0.54	$	0.51
Taxes other than income	74,727		58,118		16,609		$	1.55	$	1.54
General and administrative	53,995		43,060		10,935		$	1.12	$	1.14
Stock compensation	13,207		9,825		3,382		$	0.27	$	0.26
Loss on derivative instruments, net	74,684		17,540		57,144		N/A		N/A
Other operating expense, net	8,916		5,455		3,461		N/A		N/A
	$	926,302	$	680,232	$	246,070

Depreciation, Depletion, and Amortization

Depletion of our producing properties is computed using the units-of-production method. The economic life of each producing well depends upon the estimated proved reserves for that well, which in turn depend upon the assumed realized sales price for future production. Therefore, fluctuations in oil and gas prices will impact the level of proved reserves used in the calculation. Higher prices generally have the effect of increasing reserves, which reduces depletion expense. Conversely, lower prices generally have the effect of decreasing reserves, which increases depletion expense. The cost of replacing production also impacts our depletion expense. In addition, changes in estimates of reserve quantities, estimates of operating and future development costs, reclassifications of properties from unproved to proved, and impairments of oil and gas properties will also impact depletion expense. Our net proved properties, production, and reserves have increased during 2019 as compared to 2018 due to our ongoing exploration and development activities as well as due to our acquisition of Resolute. The increase in net properties and production resulted in an overall increase in depletion expense, while the increase in reserves partially offset the increased expense.

Fixed assets consist primarily of gathering and plant facilities, vehicles, airplanes, office furniture, and computer equipment and software.  These items are recorded at cost and are depreciated on the straight-line method based on expected lives of the individual assets, which range from 3 to 30 years.  Additionally, with the adoption of Topic 842, we depreciate our right-of-use assets, with the depreciation of our finance lease gathering system right-of-use asset being included in our depreciation expense. The increase in depreciation expense during the 2019 periods as compared to 2018 periods is primarily due to: (i) increased depreciation on our gathering and plant facilities due to ongoing expenditures on this infrastructure and (ii) the depreciation on our gathering system right-of-use asset. Depreciation, depletion, and amortization (“DD&A”) consisted of the following for the periods indicated:

	Three Months Ended June 30,				Variance Between 2019 / 2018		Per BOE
DD&A Expense (in thousands, except per BOE)	2019		2018				2019		2018
Depletion	$	196,899	$	131,220	$	65,679	$	7.87	$	6.82
Depreciation	16,428		12,168		4,260		0.66		0.63
	$	213,327	$	143,388	$	69,939	$	8.53	$	7.45

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	Six Months Ended June 30,				Variance Between 2019 / 2018		Per BOE
DD&A Expense (in thousands, except per BOE)	2019		2018				2019		2018
Depletion	$	371,611	$	251,610	$	120,001	$	7.69	$	6.66
Depreciation	32,133		24,637		7,496		0.67		0.65
	$	403,744	$	276,247	$	127,497	$	8.36	$	7.31

Production

Production expense generally consists of costs for labor, equipment, maintenance, saltwater disposal, compression, power, treating, and miscellaneous other costs (lease operating expense). Production expense also includes well workover activity necessary to maintain production from existing wells. Production expense consisted of lease operating expense and workover expense as follows:

	Three Months Ended June 30,				Variance Between 2019 / 2018			Per BOE
Production Expense (in thousands, except per BOE)	2019		2018					2019		2018
Lease operating expense	$	71,778	$	62,355	$	9,423		$	2.87	$	3.24
Workover expense	15,948		16,860		(912		)	0.64		0.88
	$	87,726	$	79,215	$	8,511		$	3.51	$	4.12

	Six Months Ended June 30,				Variance Between 2019 / 2018		Per BOE
Production Expense (in thousands, except per BOE)	2019		2018				2019		2018
Lease operating expense	$	134,186	$	122,831	$	11,355	$	2.78	$	3.25
Workover expense	30,773		27,655		3,118		0.64		0.73
	$	164,959	$	150,486	$	14,473	$	3.42	$	3.98

Lease operating expense in the second quarter 2019 increased 15%, or $9.4 million, compared to the second quarter of 2018. Lease operating expense for the six months ended June 30, 2019 increased 9%, or $11.4 million, as compared to the six months ended June 30, 2018. The increases have primarily stemmed from the Resolute acquisition and the addition of new wells as a result of our ongoing exploration and development activities. These increases were partially offset by expense reductions related to the sale of non-core properties principally located in Ward County, Texas in August 2018. The following types of expenses have increased in the 2019 periods as compared to the 2018 periods: (i) compressor rentals, (ii) labor, and (iii) electricity.

Workover expense in the second quarter 2019 decreased 5%, or $0.9 million, compared to the second quarter of 2018. Workover expense for the six months ended June 30, 2019 increased 11%, or $3.1 million, as compared to the six months ended June 30, 2018. During the six months ended June 30, 2018, our workover expense was reduced due to receiving approximately $4.0 million in insurance proceeds related to the remediation and repairs incurred as a result of a 2015 flooding event.

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Transportation, Processing, and Other Operating

Transportation, processing, and other operating costs principally consist of expenditures to prepare and transport production from the wellhead, including gathering, fuel, compression, and processing costs. Costs vary by region and will fluctuate with increases or decreases in production volumes, contractual fees, changes in fuel and compression costs, and structure of sales contracts. If the sales contract transfers control of the product at the wellhead, transportation and processing costs are included as a reduction in the revenue we record and are not included in transportation, processing, and other operating costs. The largest sales contract that we acquired with Resolute is structured this way and sales volumes under legacy Cimarex contracts structured this way have increased, therefore, our transportation and processing costs have not increased commensurate with production volume increases. Transportation, processing, and other operating costs in the second quarter 2019 were 7%, or $3.6 million, lower than the same costs in the first quarter 2018. For the six months ended June 30, 2019, transportation, processing, and other operating costs were 5%, or $4.8 million, higher than for the six months ended June 30, 2018. Transportation and processing costs included as a reduction in revenue since our adoption of ASC 606 on January 1, 2018 were $24.7 million and $42.6 million for the three and six months ended June 30, 2019 and $7.7 million and $22.2 million for the three and six months ended June 30, 2018.

Gas Gathering and Other

Gas gathering and other includes costs associated with operating our gas gathering and processing infrastructure, including product costs and operating and maintenance expenses. Gas gathering and other in the three months ended June 30, 2019 was 44%, or $4.1 million, higher than gas gathering and other in the three months ended June 30, 2018. Gas gathering and other in the six months ended June 30, 2019 was 34%, or $6.6 million, higher than gas gathering and other in the six months ended June 30, 2018. The increases are primarily due to overall increases in operating costs partially offset by lower product costs associated with processing third-party production due primarily to lower volumes and prices. The increase in operating costs was due primarily to an increase in compression costs.

Taxes Other than Income

Taxes other than income consist of production (or severance) taxes, ad valorem taxes, and other taxes.  State and local taxing authorities assess these taxes, with production taxes being based on the volume or value of production and ad valorem taxes being based on the value of properties.  Production taxes make up the majority of this expense for us.  Taxes other than income increased $13.1 million, or 47%, in the second quarter of 2019 as compared to the second quarter of 2018. Taxes other than income increased $16.6 million, or 29%, in the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. Production taxes have increased primarily due to increased production volumes. However, the majority of the increase seen in the 2019 periods as compared to the 2018 periods was due to increases in ad valorem taxes. Ad valorem taxes increased by $7.5 million, or 210%, in the second quarter of 2019 as compared to the second quarter of 2018 and by $10.4 million, or 145%, in the six months ended June 30, 2019 as compared to the six months ended June 30, 2018. These increases are due to new properties, including those acquired in the Resolute acquisition, and expected increased assessed values. Taxes other than income was 7.6% and 5.1% of production revenues for the three months ended June 30, 2019 and 2018, respectively, and was 6.8% and 5.3% of production revenues for the six months ended June 30, 2019 and 2018, respectively.

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General and Administrative

General and administrative (“G&A”) expense consists primarily of salaries and related benefits, office rent, legal and consulting fees, systems costs, and other administrative costs incurred. Our G&A expense is reported net of amounts reimbursed to us by working interest owners of the oil and gas properties we operate and net of amounts capitalized pursuant to the full cost method of accounting. The amount of expense capitalized varies and depends on whether the cost incurred can be directly identified with acquisition, exploration, and development activities. The percentage of gross G&A capitalized ranged from 44% to 50% during the periods presented in the table below, which shows our G&A costs.

	Three Months Ended June 30,						Variance Between 2019 / 2018			Six Months Ended June 30,						Variance Between 2019 / 2018
General and Administrative Expense (in thousands)	2019			2018						2019			2018
Gross G&A	$	46,930		$	39,276		$	7,654		$	96,166		$	80,124		$	16,042
Less amounts capitalized to oil and gas properties	(22,019		)	(19,537		)	(2,482		)	(42,171		)	(37,064		)	(5,107		)
G&A expense	$	24,911		$	19,739		$	5,172		$	53,995		$	43,060		$	10,935

G&A expense for the second quarter of 2019 was 26%, or $5.2 million, higher than G&A expense for the second quarter of 2018. G&A expense for the six months ended June 30, 2019 was 25%, or $10.9 million, higher than G&A expense for the six months ended June 30, 2018. These increases were primarily due to increased employee-related costs such as salaries and wages, other compensation, and benefits. Included in the six months ended June 30, 2019 was $2.9 million of severance expense related to former Resolute employees who performed transition work at Cimarex and then were subsequently terminated. 

Stock Compensation

Stock compensation expense consists of non-cash charges resulting from the amortization of the cost of restricted stock and stock option awards, net of amounts capitalized to oil and gas properties. We have recognized stock-based compensation cost as follows:

	Three Months Ended June 30,						Variance Between 2019 / 2018			Six Months Ended June 30,						Variance Between 2019 / 2018
Stock Compensation Expense (in thousands)	2019			2018						2019			2018
Restricted stock awards:
Performance stock awards	$	5,535		$	3,809		$	1,726		$	10,929		$	10,538		$	391
Service-based stock awards	5,993			4,247			1,746			13,224			9,319			3,905
	11,528			8,056			3,472			24,153			19,857			4,296
Stock option awards	396			637			(241		)	1,018			1,254			(236		)
Total stock compensation cost	11,924			8,693			3,231			25,171			21,111			4,060
Less amounts capitalized to oil and gas properties	(5,430		)	(5,598		)	168			(11,964		)	(11,286		)	(678		)
Stock compensation expense	$	6,494		$	3,095		$	3,399		$	13,207		$	9,825		$	3,382

Periodic stock 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.  The increase in total stock compensation cost in the 2019 periods as compared to the 2018 periods is primarily due to awards granted either during or subsequent to the 2018 periods and performance stock award forfeitures that occurred during the second quarter of 2018, both of which were partially offset by awards vesting prior to or during the 2019 periods. Our accounting policy is to account for forfeitures in compensation cost when they occur.

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(Gain) Loss on Derivative Instruments, Net

The following table presents the components of (Gain) loss on derivative instruments, net for the periods indicated. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding our derivative instruments.

	Three Months Ended June 30,						Variance Between 2019 / 2018			Six Months Ended June 30,						Variance Between 2019 / 2018
(Gain) Loss on Derivative Instruments, Net (in thousands)	2019			2018						2019			2018
(Increase) decrease in fair value of derivative instruments, net:
Gas contracts	$	(6,370	)	$	14,566		$	(20,936	)	$	(16,216	)	$	2,777		$	(18,993	)
Oil contracts	(28,161		)	(397		)	(27,764		)	88,086			(5,156		)	93,242
	(34,531		)	14,169			(48,700		)	71,870			(2,379		)	74,249
Cash (receipts) payments on derivative instruments, net:
Gas contracts	(21,176		)	(9,918		)	(11,258		)	(17,412		)	(15,037		)	(2,375		)
Oil contracts	14,939			17,448			(2,509		)	20,226			34,956			(14,730		)
	(6,237		)	7,530			(13,767		)	2,814			19,919			(17,105		)
(Gain) loss on derivative instruments, net	$	(40,768	)	$	21,699		$	(62,467	)	$	74,684		$	17,540		$	57,144

Other Operating Expense, Net

Other operating expense, net during the six months ended June 30, 2019 was comprised primarily of $8.4 million in acquisition-related costs incurred to effect the Resolute acquisition. These costs consisted primarily of advisory, legal, and other professional and consulting fees. Other operating expense, net during the three months ended June 30, 2018 was comprised primarily of $4.9 million in litigation settlements.

Other Income and Expense

	Three Months Ended June 30,						Variance Between 2019 / 2018			Six Months Ended June 30,						Variance Between 2019 / 2018
Other Income and Expense (in thousands)	2019			2018						2019			2018
Interest expense	$	24,674		$	16,895		$	7,779		$	45,079		$	33,678		$	11,401
Capitalized interest	(16,805		)	(4,850		)	(11,955		)	(25,547		)	(9,660		)	(15,887		)
Loss on early extinguishment of debt	—			—			—			4,250			—			4,250
Other, net	(2,167		)	(2,605		)	438			(4,408		)	(7,172		)	2,764
	$	5,702		$	9,440		$	(3,738	)	$	19,374		$	16,846		$	2,528

The majority of our interest expense relates to interest on our senior unsecured notes. Also included in interest expense is interest expense on our Credit Facility borrowings, the amortization of debt issuance costs and discounts, and miscellaneous interest expense.  See LIQUIDITY AND CAPITAL RESOURCES Long-term Debt below for further information regarding our debt. The increase in interest expense in the 2019 periods as compared to the 2018 periods is primarily due to (i) the March 8, 2019 issuance of $500 million aggregate principal amount of 4.375% senior unsecured notes due March 15, 2029 at 99.862% of par to yield 4.392% per annum, (ii) borrowings on our Credit Facility in 2019 to help fund the Resolute acquisition and thereafter to meet cash requirements as needed (we did not borrow on our Credit Facility in 2018), and (iii) interest expense on our finance lease. The $4.3 million loss on early extinguishment of debt incurred during the six months ended June 30, 2019 was associated with the $600 million of

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8.5% senior notes we acquired with Resolute and elected to immediately repay. The maturity date of the Resolute notes was May 1, 2020.

We capitalize interest on non-producing leasehold costs, the in-progress costs of drilling and completing wells, and constructing midstream assets. Capitalized interest will fluctuate based on the rates applicable to borrowings outstanding during the period and the amount of costs subject to interest capitalization. The amount of costs subject to interest capitalization was higher in the three and six months ended June 30, 2019 as compared to the three and six months ended June 30, 2018, primarily due to the Resolute acquisition. Included in the preliminary purchase price allocation of the Resolute acquisition was non-producing leasehold costs of $1.05 billion.

Components of Other, net consist of miscellaneous income and expense items that vary from period to period, including interest income, gain or loss related to the sale or value of oil and gas well equipment and supplies, gain or loss on miscellaneous asset sales, and income and expense associated with other non-operating activities.

Income Tax Expense

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,						Variance Between 2019 / 2018			Six Months Ended June 30,						Variance Between 2019 / 2018
Income Tax Expense (in thousands)	2019			2018						2019			2018
Current tax (benefit)	$	—		$	(717	)	$	717		$	—		$	(717	)	$	717
Deferred tax expense	34,046			42,783			(8,737		)	42,119			99,732			(57,613		)
	$	34,046		$	42,066		$	(8,020	)	$	42,119		$	99,015		$	(56,896	)
Combined federal and state effective income tax rate	23.7		%	23.0		%				23.7		%	23.2		%

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 and non-deductible expenses. See Note 9 to the Condensed Consolidated Financial Statements for additional information regarding our income taxes.

LIQUIDITY AND CAPITAL RESOURCES

Overview

We strive to maintain an adequate liquidity level to address volatility and risk. Sources of liquidity include our cash flow from operations, cash on hand, available borrowing capacity under our revolving credit facility, proceeds from sales of non-core assets, and, from time to time, public financings based on our monitoring of capital markets and our balance sheet.

Our liquidity is highly dependent on prices we receive for the oil, gas, and NGLs we produce. Prices we receive are determined by prevailing market conditions and greatly influence our revenue, cash flow, profitability, access to capital, and future rate of growth. See RESULTS OF OPERATIONS Revenues above for further information regarding the impact realized prices have had on our earnings.

We deal with volatility in commodity prices primarily by maintaining flexibility in our capital investment program. We have a balanced and abundant drilling inventory and limited long-term commitments, which enables us to respond quickly to industry volatility. Based on current economic conditions, our 2019 exploration and development (“E&D”) expenditures are projected to range from $1.35 billion to $1.45 billion. Investments in gathering, processing, and other infrastructure are projected to be approximately $70 million for 2019. See Capital Expenditures below for information regarding our E&D activities for the three and six months ended June 30, 2019 and 2018.

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We periodically use derivative instruments to mitigate volatility in commodity prices. At June 30, 2019, we had derivative contracts covering a portion of our 2019 - 2020 production. 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. See Note 3 to the Condensed Consolidated Financial Statements for information regarding our derivative instruments.

Cash and cash equivalents at June 30, 2019 were $19.4 million. At June 30, 2019, our long-term debt consisted of $2.0 billion of senior unsecured notes, with $750 million 4.375% notes due in 2024, $750 million 3.90% notes due in 2027, and $500 million 4.375% notes due in 2029. At June 30, 2019, we had no borrowings and $2.5 million in letters of credit outstanding under our credit facility, leaving an unused borrowing availability of $1.248 billion. See Long-term Debt below for more information regarding our debt.

Our debt to total capitalization ratio at June 30, 2019 was 35%, up from 31% at December 31, 2018. This ratio is calculated by dividing the sum of (i) the principal amount of long-term debt and (ii) redeemable preferred stock by the sum of (i) the principal amount of long-term debt, (ii) redeemable preferred stock, and (iii) total stockholders’ equity, with all numbers coming directly from the Condensed Consolidated Balance Sheet. Management uses this ratio as one indicator of our financial condition and believes professional research analysts and rating agencies use this ratio for this purpose and to compare our financial condition to other companies’ financial conditions.

We may, from time to time, seek to repurchase our outstanding preferred stock through cash repurchases and/or exchanges for equity securities, privately negotiated transactions, or otherwise. Such activities, if any, will depend on prevailing market conditions, our liquidity requirements, contractual restrictions, and other factors.

We expect our operating cash flow and other capital resources to be adequate to meet our needs for planned capital expenditures, working capital, debt service, and dividends declared for the next twelve months.

Analysis of Cash Flow Changes

The following table presents the totals of the major cash flow classification categories from our Condensed Consolidated Statements of Cash Flows for the periods indicated.

	Six Months Ended June 30,
(in thousands)	2019			2018
Net cash provided by operating activities	$	664,083		$	704,339
Net cash used by investing activities	$	(1,022,672	)	$	(671,552	)
Net cash used by financing activities	$	(422,663	)	$	(22,498	)

Net cash provided by operating activities for the six months ended June 30, 2019 was $664.1 million, down $40.3 million, or 6%, from $704.3 million for the six months ended June 30, 2018. The $40.3 million decrease resulted primarily from increased operating expenses. Partially offsetting this decrease in operating cash flows was a decrease in cash outflows for settlements of derivative instruments. Despite increased production volumes, revenue remained flat between the two periods due to decreased pricing and, therefore, did not offset the increased cash outflows for operating expenses. See RESULTS OF OPERATIONS above for more information regarding the changes in revenue and operating expenses.

Net cash used by investing activities for the six months ended June 30, 2019 and 2018 was $1.02 billion and $671.6 million, respectively. The majority of our cash flows used by investing activities are for E&D expenditures, which totaled $711.8 million and $650.8 million for the six months ended June 30, 2019 and 2018, respectively. Cash used by investing activities in the six months ended June 30, 2019 includes the $325.7 million in cash paid for the Resolute acquisition, net of the $41.2 million in cash acquired with Resolute. The remaining investing cash outflows are primarily for midstream asset expenditures. Included in net cash used by investing activities are the proceeds of miscellaneous asset sales, including non-core oil and gas properties.

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Net cash used by financing activities was $422.7 million and $22.5 million during the six months ended June 30, 2019 and 2018, respectively. During the six months ended June 30, 2019, we issued $500 million aggregate principal amount of 4.375% senior unsecured notes due March 15, 2029 at 99.862% of par for proceeds of $499.3 million, paying $4.6 million in underwriting fees and financing costs. Additionally, we borrowed and repaid an aggregate of $1.21 billion on our credit facility during the six months ended June 30, 2019 to assist in funding the Resolute acquisition and thereafter to meet cash requirements as needed. In connection with the acquisition of Resolute, we assumed $870.0 million in principal amount of long-term debt that we immediately repaid, incurring a redemption fee of $4.3 million. During the six months ended June 30, 2019, we amended our credit facility, paying $3.0 million in financing costs. We had no long-term debt-related investing cash flows during the six months ended June 30, 2018. Net cash used by financing activities during both periods included: (i) the payment of dividends, (ii) the payment of income tax withholdings made on behalf of our employees upon the net settlement of employee stock awards, and (iii) the receipt of proceeds from exercises of stock options. During the six months ended June 30, 2019, we paid one $0.18 per common share dividend, one $0.20 per common share dividend, and one $20.31 per preferred share dividend, totaling $38.6 million. During the six months ended June 30, 2018, we paid one $0.08 per common share dividend and one $0.16 per common share dividend, totaling $22.8 million. Future dividend payments will depend on our level of earnings, financial requirements, and other factors considered relevant by our Board of Directors.

Capital Expenditures

The following table presents capitalized expenditures for oil and gas acquisition, exploration, and development activities and property sales, net of applicable purchase price adjustments.

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
Acquisitions:
Proved	$	1,200		$	—		$	693,800		$	62
Unproved	1,000			77			1,051,782			2,236
	2,200			77			1,745,582			2,298
Exploration and development:
Land and seismic	14,552			10,327			24,079			20,424
Exploration and development	310,428			365,097			668,919			668,469
	324,980			375,424			692,998			688,893
Property sales:
Proved	(22,058		)	(4,577		)	(18,028		)	(29,541		)
Unproved	(6,253		)	(441		)	(9,754		)	(5,301		)
	(28,311		)	(5,018		)	(27,782		)	(34,842		)
	$	298,869		$	370,483		$	2,410,798		$	656,349

Amounts in the table above are presented on an accrual basis. The Condensed Consolidated Statements of Cash Flows reflect activities on a cash basis, when payments are made and proceeds received.

On March 1, 2019, we completed the acquisition of Resolute Energy Corporation, an independent oil and gas company focused on the acquisition and development of unconventional oil and gas properties in the Delaware Basin area of the Permian Basin of west Texas. The fair value of the proved and unproved properties recorded in the preliminary purchase price allocation for this acquisition was $692.6 million and $1.05 billion, respectively.

Our 2019 E&D capital investment is projected to range from $1.35 billion to $1.45 billion, with the majority expected to be invested in the Permian Basin. As has been our historical practice, we regularly review our capital expenditures throughout the year and will adjust our investments based on increases or decreases in commodity prices, service costs, and drilling success. We have the flexibility to adjust our capital expenditures based upon market conditions.

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We intend to continue to fund our 2019 capital investment program with cash flow from our operating activities, cash on hand, and borrowings under our credit facility. Sales of non-core assets and possible capital markets transactions may also be used to supplement funding of capital expenditures and acquisitions. The timing of capital expenditures and the receipt of cash flows do not necessarily match, which may cause us to borrow and repay funds under our credit facility from time to time. See Long-term Debt—Bank Debt below for further information regarding our credit facility.

The following table reflects wells completed by region during the periods indicated.

	Three Months Ended June 30,		Six Months Ended June 30,
	2019	2018	2019	2018
Gross wells
Permian Basin	44	32	56	49
Mid-Continent	66	57	92	94
	110	89	148	143
Net wells
Permian Basin	32	13	37	22
Mid-Continent	8	10	11	16
	40	23	48	38

As of June 30, 2019, we had 27 gross (13 net) wells in the process of being drilled: 14 gross (12 net) in the Permian Basin and 13 gross (1 net) in the Mid-Continent region. As of June 30, 2019, there were 99 gross (24 net) wells waiting on completion: 44 gross (20 net) in the Permian Basin and 55 gross (4 net) in the Mid-Continent region. As of June 30, 2019, we had 7 operated rigs running, all in the Permian Basin.

We have made, and will continue to make, expenditures to comply with environmental and safety regulations and requirements. These costs are considered a normal recurring cost of our ongoing operations. While we expect current pending legislation or regulations to increase the cost of business, we do not anticipate that we will be required to expend amounts that will have a material adverse effect on our financial position or operations, nor are we aware of any pending regulatory changes that would have a material impact, based on current laws and regulations. However, compliance with new legislation or regulations could increase our costs or adversely affect demand for oil or gas and result in a material adverse effect on our financial position or operations. See our Form 10-K for the year ended December 31, 2018, Item 1A Risk Factors, for a description of risks related to current and potential future environmental and safety regulations and requirements that could adversely affect our operations and financial condition.

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Long-term Debt

Long-term debt at June 30, 2019 and December 31, 2018 consisted of the following:

	June 30, 2019							December 31, 2018
(in thousands)	Principal		Unamortized Debt Issuance Costs and Discounts (1)			Long-term Debt, net		Principal		Unamortized Debt Issuance Costs and Discount (1)			Long-term Debt, net
4.375% Notes due 2024	$	750,000	$	(3,982	)	$	746,018	$	750,000	$	(4,439	)	$	745,561
3.90% Notes due 2027	750,000		(6,651		)	743,349		750,000		(7,007		)	742,993
4.375% Notes due 2029	500,000		(5,137		)	494,863		—		—			—
	$	2,000,000	$	(15,770	)	$	1,984,230	$	1,500,000	$	(11,446	)	$	1,488,554

________________________________________

(1) At June 30, 2019, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.1 million and $1.5 million, respectively. At December 31, 2018, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.4 million and $1.6 million, respectively. At June 30, 2019, the unamortized debt issuance costs and discount related to the 4.375% Notes due 2029 were $4.5 million and $0.7 million, respectively. The 4.375% Notes due 2024 were issued at par.

Bank Debt

On February 5, 2019, we entered into an Amended and Restated Credit Agreement for our senior unsecured revolving credit facility (“Credit Facility”). Among other things, the amended and restated credit facility increased the aggregate commitments to $1.25 billion with an option for us to increase the aggregate commitments to $1.5 billion, and extended the maturity date to February 5, 2024. As of June 30, 2019, 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. During the three months ended June 30, 2019, we borrowed and repaid an aggregate of $528.0 million on the Credit Facility to meet cash requirements as needed.

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-capital ratio of no greater than 65%. As of June 30, 2019, we were in compliance with all of the financial covenants.

At June 30, 2019 and December 31, 2018, we had $4.6 million and $2.2 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. We incurred $3.0 million in additional debt issuance costs in amending our Credit Facility.

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Senior Notes

On March 8, 2019, we issued $500 million aggregate principal amount of 4.375% senior unsecured notes due March 15, 2029 at 99.862% of par to yield 4.392% per annum.  We received $494.7 million in net cash proceeds, after deducting underwriters’ fees, discount, and debt issuance costs.  The notes bear an annual interest rate of 4.375% and interest is payable semiannually on March 15 and September 15, with the first payment due September 15, 2019.  We used the net proceeds to repay borrowings under our Credit Facility. 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 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 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, 2019.

Working Capital Analysis

Our working capital fluctuates primarily as a result of our realized commodity prices, increases or decreases in our production volumes, changes in receivables and payables related to our operating and E&D activities, changes in our oil and gas well equipment and supplies, and changes in the fair value of our derivative instruments.

At June 30, 2019, we had a working capital deficit of $294.6 million, a decrease of $1.01 billion or 141% from a working capital surplus of $715.4 million at December 31, 2018.

Our working capital decreased primarily due to the decrease in Cash and cash equivalents of $781.3 million, which was a result of our acquisition of Resolute and subsequent repayment of Resolute’s long-term debt. See Note 13 to the Condensed Consolidated Financial Statements for more information regarding the acquisition. In addition to the decrease in cash, other significant changes to working capital consisted primarily of the following decreases: 

• Our net current derivative instrument position decreased by $81.4 million from an asset at December 31, 2018 to a liability at June 30, 2019.

• The adoption of Topic 842 increased our current liabilities by $68.7 million, representing estimated lease liabilities, primarily for office space, well-head compressors, pipeline compressors, and artificial lift mechanisms. See Note 10 to the Condensed Consolidated Financial Statements for more information regarding our lease liabilities and the adoption of Topic 842.

• Accounts receivable decreased by $66.8 million.

Accounts receivable are a major component of our working capital and include amounts due from a diverse group of companies comprised of major energy companies, pipeline companies, local distribution companies, and other end-users. Historically, losses associated with uncollectible receivables have not been significant. The fair value of derivative instruments fluctuates based on changes in the underlying price indices as compared to the contracted prices.

Dividends

A quarterly cash dividend has been paid on our common stock every quarter since the first quarter of 2006. In May 2019, our Board of Directors declared a cash dividend of $0.20 per common share, totaling $20.3 million, which is payable on or before August 30, 2019 to stockholders of record on August 15, 2019. In March 2019, in conjunction with the Resolute acquisition, we issued 62.5 thousand shares of 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, par value $0.01 per share. In May 2019, our Board of Directors declared a cash dividend

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of $20.31 per preferred share, totaling $1.3 million. The dividend was paid in July to preferred stockholders of record on July 1, 2019. Future dividend payments will depend on our level of earnings, financial requirements, and other factors considered relevant by our Board of Directors. See Note 5 to the Condensed Consolidated Financial Statements for further information regarding our stock and Note 13 to the Condensed Consolidated Financial Statements for further information regarding the Resolute acquisition.

Off-Balance Sheet Arrangements

We may enter into off-balance sheet arrangements and transactions that can give rise to material off-balance sheet obligations. As of June 30, 2019, our material off-balance sheet arrangements consisted of operating lease agreements with lease terms at commencement of 12 months or less. As an accounting policy we have elected not to apply the recognition requirements of Topic 842 to these leases. As such, we have not recorded any lease liabilities associated with these leases.

Contractual Obligations and Material Commitments

At June 30, 2019, we had the following contractual obligations and material commitments:

	Payments Due by Period
Contractual obligations (in thousands)	Total		7/1/19 - 6/30/20		7/1/20 - 6/30/22			7/1/22 - 6/30/24			7/1/24 and Thereafter
Long-term debt—principal (1)	$	2,000,000	$	—	$	—		$	750,000		$	1,250,000
Long-term debt—interest (1)	617,313		82,307		167,875			167,875			199,256
Operating leases (2)	101,885		24,961		38,238			23,551			15,135
Unconditional purchase obligations (3)	99,006		24,556		27,235			19,153			28,062
Derivative liabilities	50,896		50,056		840			—			—
Asset retirement obligation (4)	173,873		16,492		—		(4)	—		(4)	—		(4)
Other long-term liabilities (5)	43,066		2,670		3,401			5,217			31,778
	$	3,086,039	$	201,042	$	237,589		$	965,796		$	1,524,231

________________________________________

(1) The interest payments presented above include the accrued interest payable on our long-term debt as of June 30, 2019 as well as future payments calculated using the long-term debt’s fixed rates, stated maturity dates, and principal amounts outstanding as of June 30, 2019. See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding our debt.

(2) Operating leases include the estimated remaining contractual payments under lease agreements as of June 30, 2019. These lease agreements are primarily comprised of leases for commercial real estate, which consists primarily of office space, and compressor equipment.

(3) Of the total unconditional purchase obligations, $28.2 million represents obligations for the purchase of sand for well completions and $70.5 million represents obligations for firm transportation agreements for gas and oil pipeline capacity.

(4) We have excluded the presentation of the timing of the cash flows associated with our long-term asset retirement obligations because we cannot make a reasonably reliable estimate of the future period of cash settlement. The long-term asset retirement obligation is included in the total asset retirement obligation presented.

(5) Other long-term liabilities include contractual obligations associated with our employee supplemental savings plan, gas balancing liabilities, and other miscellaneous liabilities. All of these liabilities are accrued on our Condensed Consolidated Balance Sheet. The current portion associated with these long-term liabilities is also presented in the table above.

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The following discusses various commercial commitments that we have made that may include potential future cash payments if we fail to meet various performance obligations. These are not reflected in the table above, unless otherwise noted.

At June 30, 2019, we had estimated commitments of approximately: (i) $304.6 million to finish drilling, completing, or performing other work on wells and various other infrastructure projects in progress and (ii) $19.2 million to finish gathering system construction in progress.

At June 30, 2019, we had firm sales contracts to deliver approximately 290.7 Bcf of gas over the next 5.6 years. If we do not deliver this gas, our estimated financial commitment, calculated using the July 2019 index price, would be approximately $303.3 million. The value of this commitment will fluctuate due to price volatility and actual volumes delivered. However, we believe no financial commitment will be due based on our current proved reserves and production levels from which we can fulfill these volumetric obligations.

In connection with gas gathering and processing agreements, we have volume commitments over the next 9.5 years. If we do not deliver the committed gas or NGLs, as the case may be, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2019, would be approximately $655.2 million. However, we believe no financial commitment will be due based on our current proved reserves and production levels from which we can fulfill these volumetric obligations.

We have minimum volume delivery commitments associated with agreements to reimburse connection costs to various pipelines. If we do not deliver this gas, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2019, would be approximately $153.3 million. Of this total, we have accrued a liability of $4.6 million representing the estimated amount we will have to pay due to insufficient forecasted volumes at particular connection points. This accrual is reflected in the table above in Other long-term liabilities.

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

Taking into account current commodity prices and anticipated levels of production, we believe that our net cash flow generated from operations and our other capital resources will be adequate to meet future obligations.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We consider accounting policies and estimates related to oil and gas reserves, full cost accounting, and income taxes to be critical accounting policies and estimates. These are summarized in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2018.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risk including the risk of loss arising from adverse changes in commodity prices and interest rates.

Price Fluctuations

Our major market risk is pricing applicable to our oil, gas, and NGL production. The prices we receive for our production are based on prevailing market conditions and are influenced by many factors that are beyond our control. Pricing for oil, gas, and NGL production has been volatile and unpredictable. For the three months ended June 30, 2019, our total production revenue was comprised of approximately 76% oil sales, 6% gas sales, and 18% NGL sales. For the six months ended June 30, 2019, our total production revenue was comprised of approximately 69% oil sales, 13% gas sales, and 18% NGL sales. The following table shows how hypothetical changes in the realized prices we receive for our commodity sales may have impacted revenue for the periods indicated.

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			Impact on Revenue
	Change in Realized Price		Three Months Ended June 30, 2019	Six Months Ended June 30, 2019
			(in thousands)
Oil	± $1.00	per barrel	± $7,592	± $14,739
Gas	± $0.10	per Mcf	± $6,059	± $11,811
NGL	± $1.00	per barrel	± $7,313	± $13,879
			± $20,964	± $40,429

We periodically enter into financial derivative contracts to hedge a portion of our price risk associated with our future oil and gas production. At June 30, 2019, we had oil and gas derivatives covering a portion of our 2019 and 2020 production, which were recorded as current and non-current assets and liabilities. At June 30, 2019, our oil and gas derivatives had a gross asset fair value of $43.6 million and a gross liability fair value of $50.9 million. See Note 3 to the Condensed Consolidated Financial Statements for additional information regarding our derivative instruments.

While these contracts limit the downside risk of adverse price movements, they may also limit future cash flow from favorable price movements. The following table shows how hypothetical changes in the forward prices used to calculate the fair value of our derivatives may have impacted the fair value as of June 30, 2019.

		Impact on Fair Value
	Change in Forward Price	June 30, 2019
		(in thousands)
Oil	-$1.00	$	5,969
Oil	+$1.00	$	(6,035	)
Gas	-$0.10	$	7,056
Gas	+$0.10	$	(6,963	)

Interest Rate Risk

At June 30, 2019, our long-term debt consisted of $750 million of 4.375% senior unsecured notes that mature on June 1, 2024, $750 million of 3.90% senior unsecured notes that mature on May 15, 2027, and $500 million of 4.375% senior unsecured notes that mature on March 15, 2029. Because all of our outstanding long-term debt is at a fixed rate, we consider our interest rate exposure to be minimal. See Note 2 to the Condensed Consolidated Financial Statements for additional information regarding our debt.

ITEM 4. CONTROLS AND PROCEDURES 

Evaluation of Disclosure Controls and Procedures

Cimarex’s management, under the supervision and with the participation of the Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), have evaluated the effectiveness of Cimarex’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of June 30, 2019.  Based on that evaluation, the CEO and CFO concluded that the disclosure controls and procedures are effective in providing reasonable assurance that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods required by the U.S. Securities and Exchange Commission’s rules and forms and that such information is accumulated and communicated to management, including the CEO and CFO, to allow timely decisions regarding required disclosures.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting that occurred during the fiscal quarter ended June 30, 2019 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

51

PART II

ITEM 1. LEGAL PROCEEDINGS

The information set forth under the heading “Litigation” in Note 10 to the Condensed Consolidated Financial Statements is incorporated by reference in response to this item.

ITEM 1A. RISK FACTORS  

In addition to the other information set forth in this report, you should carefully consider the risks discussed in our Annual Report on Form 10-K for the year ended December 31, 2018. The risks described in the Annual Report on Form 10-K for the year ended December 31, 2018 are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition, or future results. Material changes from the risk factors previously disclosed in our Form 10-K for the year ended December 31, 2018 are set forth below.

Oil, gas, and NGL prices fluctuate due to a number of factors beyond our control, creating a component of uncertainty in our development plans and overall operations. Declines in prices adversely affect our financial results and rate of growth in proved reserves and production.

Oil and gas markets are volatile. We cannot predict future prices. The prices we receive for our production heavily influence our revenue, profitability, access to capital, and future rate of growth. The prices we receive depend on numerous factors beyond our control. These factors include, but are not limited to, changes in domestic and global supply and demand for oil and gas, the level of domestic and global oil and gas exploration and production activity, pipeline capacity constraints limiting takeaway and increasing basis differentials, geopolitical instability, the actions of the Organization of Petroleum Exporting Countries, weather conditions, technological advances affecting energy consumption, governmental regulations and taxes, and the price and technological advancement of alternative fuels.

Our proved oil and gas reserves and production volumes will decrease unless those reserves are replaced with new discoveries or acquisitions. Accordingly, for the foreseeable future, we expect to make substantial capital investments for the exploration and development of new oil and gas reserves. Historically, we have paid for these types of capital expenditures with cash flow provided by our production operations, our revolving credit facility, and proceeds from the sale of senior notes or equity. Low prices reduce our cash flow and the amount of oil and gas that we can economically produce and may cause us to curtail, delay, or defer certain exploration and development projects. Moreover, low prices may impact our abilities to borrow under our revolving credit facility and to raise additional debt or equity capital to fund acquisitions.

If commodity pricing conditions stay at current levels or decline further, we will be required to take write-downs of the carrying value of our oil and gas properties.

Under the full cost method of accounting, we are required to perform quarterly ceiling test calculations to test our oil and gas properties for possible impairment. At June 30, 2019, a decline of approximately 4% or more in the value of our ceiling limitation would have resulted in an impairment. If commodity pricing conditions stay at current levels or decline further we will incur full cost ceiling impairments in future quarters. Because the ceiling calculation uses trailing twelve-month average commodity prices, the effect of declining prices is a lower ceiling value each quarter. This will result in ongoing impairments each quarter until prices stabilize or improve. Impairment charges do not affect cash flow from operating activities, but do adversely affect our net income and various components of our balance sheet.

52

ITEM 6. EXHIBITS

Exhibits not incorporated by reference to a prior filing are designated by an asterisk (*) and are filed herewith.

Exhibit Number	Description
2.1	Agreement and Plan of Merger dated as of November 18, 2018, by and among Cimarex Energy Co., CR Sub 1 Inc., CR Sub 2 LLC, and Resolute Energy Corporation (filed on November 20, 2018 as Exhibit 2.1 to the Current Report on Form 8-K (Commission File No. 001-31446) and incorporated herein by reference).
4.1	Certificate of Designations of 8⅛% Series A Cumulative Perpetual Convertible Preferred Stock of Cimarex Energy Co., dated February 28, 2019 (filed on March 1, 2019 as Exhibit 3.1 to the Current Report on Form 8-K (Commission File No. 001-31446) and incorporated herein by reference).
4.2	Second Supplemental Indenture dated as of March 8, 2019, by and between Cimarex Energy Co. and U.S. Bank National Association, as trustee (filed on March 8, 2019 as Exhibit 4.2 to the Current Report on Form 8-K (Commission File No. 001-31446) and incorporated herein by reference).
4.3	Form of 4.375% Senior Notes due 2029 (filed on March 8, 2019 as Exhibit 4.3 to the Current Report on Form 8-K (Commission File No. 001-31446) and incorporated herein by reference).
10.1	Amended and Restated Credit Agreement Dated as of February 5, 2019, by and among Cimarex, as Borrower, the Administrative Agent, the Syndication Agent, the Co-Documentation Agents, the Lenders, and the Lead Arrangers and Bookrunners (filed on February 7, 2019 as Exhibit 10.1 to the Current Report on Form 8-K (Commission File No. 001-31446) and incorporated herein by reference).
10.2	Form of Notice of Grant of Restricted Stock (Director) and Award Agreement (filed on May 29, 2019 as Exhibit 10.2 to the Current Report on Form 8-K (Commission File No. 001-31446) and incorporated herein by reference).
10.3	2019 Equity Incentive Plan (filed on May 30, 2019 as Exhibit 99.1 to the Registration Statement on Form S-8 (Commission File No. 001-31446) and incorporated herein by reference).
10.4	Form of Notice of Grant of Restricted Stock and Award Agreement    *
10.5	Form of Notice of Grant of Nonqualified Stock Option and Award Agreement   *
31.1	Certification of Thomas E. Jorden, Chief Executive Officer of Cimarex Energy Co., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   *
31.2	Certification of G. Mark Burford, Chief Financial Officer of Cimarex Energy Co., pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.   *
32.1	Certification of Thomas E. Jorden, Chief Executive Officer of Cimarex Energy Co., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.   *
32.2	Certification of G. Mark Burford, Chief Financial Officer of Cimarex Energy Co., pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.   *
101.INS	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH	Inline XBRL Taxonomy Extension Schema Document
101.CAL	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.LAB	Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE	Inline XBRL Taxonomy Extension Presentation Linkbase Document
101.DEF	Inline XBRL Taxonomy Extension Definition Linkbase Document

53

SIGNATURES

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

August 5, 2019
	CIMAREX ENERGY CO.
	/s/ G. Mark Burford
	G. Mark Burford
	Senior Vice President and Chief Financial Officer
	(Principal Financial Officer)
	/s/ Timothy A. Ficker
	Timothy A. Ficker
	Vice President, Controller, and Chief Accounting Officer
	(Principal Accounting Officer)

54

EX-10.4

CIMAREX ENERGY CO.

1700 Lincoln Street, Suite 3700

Denver, Colorado 80203-4553

NOTICE OF GRANT OF RESTRICTED STOCK

AND AWARD AGREEMENT

Restricted Stock Holder: <first_name> <last_name>

Date of Grant: <award_date>

Number of Shares of Restricted Stock: <shares_awarded>

Restriction Period Ends: <vest_schedule_description>    

By accepting this agreement online, you and Cimarex Energy Co. (the “Company”) agree that the Restricted Stock is granted under and governed by the terms and conditions of the Company’s 2019 Equity Incentive Plan (the “Plan”) and the Award Agreement (the “Agreement”), both of which are attached and made a part of this document. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of this Agreement, the terms and conditions of the Plan will prevail.

CIMAREX 2019 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD NOTICE OF GRANT AND AWARD AGREEMENT    Page 1 of 4 Pages

AWARD AGREEMENT

1.    Grant of Restricted Stock. The Company grants you Shares of Restricted Stock as set forth in the foregoing Notice of Grant. The Shares of Restricted Stock may be evidenced in the manner the Company deems appropriate, including, without limitation, a book-entry registration or issuance of a stock certificate or certificates.

2.    Restrictions on Transfer. You shall not sell, assign, transfer by gift or otherwise, pledge, hypothecate, or otherwise dispose of, by operation of law or otherwise, any of the Shares prior to the end of the Restriction Period or as otherwise permitted by this Agreement or the terms of the Plan.

3.    Termination of Employment.

(a)    Death or Disability. If your employment with the Company terminates on account of death or Disability prior to the end of the Restriction Period, the Restricted Stock will be fully vested and payable as of the date of such death or disability.

(b)    Other Terminations. If your employment with the Company terminates prior to the end of the Restriction Period for any reason other than death or Disability, whether or not your termination is voluntary or involuntary, your unvested Restricted Stock will be forfeited, and you shall immediately transfer and assign to the Company, without any consideration, all unvested Restricted Stock, and you shall not exercise any of the privileges or rights of a stockholder with respect to the Restricted Stock.

4.    Change in Control. Upon the occurrence of a Change in Control, the Restricted Stock will be fully vested and freely transferable, except that you shall not make any sale or transfer that would conflict with or violate any of the provisions of the Securities Act of 1933 or applicable state securities laws or the Company’s insider trading policy. The Committee may also provide for the assumption or substitution of the Restricted Stock by the surviving entity on terms comparable to the terms of this Agreement and may make any other provision for the Restricted Stock as the Committee, in its sole discretion, deems appropriate.

5.    Removal of Restrictions. Upon the expiration of the Restriction Period, the Company shall deliver Shares to you. The Company may elect to electronically deliver the Shares to your account at a brokerage firm selected by the Company.

6.    Withholding Taxes. Unless you make other arrangements with the Company, the Company will withhold a number of Shares having a Fair Market Value (as defined in the Plan) on the date of payment equal to the minimum statutory total tax which could be withheld on the transaction. You may also make arrangements with the Company to pay the amount of taxes required by law or to deliver to the Company previously owned Shares having a Fair Market Value on the date of payment equal to the minimum statutory total tax. In no event will any form of payment made by you be permitted if it would result in an accounting charge with respect to Shares delivered to pay such taxes, unless otherwise approved by the Committee.

7.    Effect of Prohibited Transfer. If any transfer of Shares of Restricted Stock is made or attempted to be made contrary to the terms of this Agreement, the Company will have the right to acquire, without the payment of any consideration, such Shares from you or your transferee, at any time before or after a prohibited transfer. In addition to any other legal or equitable remedies it may have, the Company may enforce its rights to specific performance to the extent permitted by law and may exercise such other

CIMAREX 2019 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD NOTICE OF GRANT AND AWARD AGREEMENT    Page 2 of 4 Pages

equitable remedies then available to it. The Company may refuse for any purpose to recognize any transferee who receives Shares contrary to the provisions of this Agreement as a stockholder and may retain and/or recover all dividends on such Shares that were paid or payable subsequent to the date on which the prohibited transfer was made or attempted.

8.    Adjustments to the Stock. During the Restriction Period, the Plan provides for certain adjustments to the number of Shares in connection with a reorganization or other changes to the Company’s common stock.

9.    Rights as a Stockholder. During the Restriction Period, you will have the right to receive dividends and to vote the Shares of Restricted Stock. If any dividends or distributions are paid in Shares of Common Stock, all of these Shares will be subject to the same restrictions on transferability as the Shares of Restricted Stock with respect to which they were paid.

10.    Miscellaneous.

(a)    Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be delivered electronically, personally or mailed (U.S. Mail) by the Company to you at your then current address as maintained by the Company or such other address as you may advise the Company in writing. Any such notice shall be deemed to have been given as of the second day after deposit in the United States mails, postage prepaid, properly addressed as set forth in this paragraph, in the case of a mailed notice, or as of the date delivered in the case of electronic or personal delivery.

(b)    Amendment. Except as provided herein or in the Plan, this Agreement may not be amended or otherwise modified unless evidenced in writing and signed by the Company and you.

(c)    Defined Terms. Capitalized terms have the meaning set forth in the Plan or herein, as the case may be.

(d)    Construction; Severability. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(e)    Waiver. Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Committee appointed under the Plan, but only to the extent permitted under the Plan.

(f)    Binding Effect. This Agreement shall be binding upon and inure to the benefit of the Company and you and their respective heirs, executors, administrators, legal representatives, successors and assigns.

(g)    No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed as giving you any right to remain employed by (or provide other service to) the Company, any Subsidiary or any Affiliated Entity. The Company reserves the right to terminate your employment (or other service) at any time.

CIMAREX 2019 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD NOTICE OF GRANT AND AWARD AGREEMENT    Page 3 of 4 Pages

(h)     Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.

Attachments:

These documents constitute part of a prospectus covering securities that have been registered under the Securities Act of 1933.

Cimarex Energy Co. 2019 Equity Incentive Plan

Summary of the Cimarex Energy Co. 2019 Equity Incentive Plan

Form 10-K and other periodic reports [SEC Filings]

[REST OF THE PAGE IS LEFT BLANK INTENTIONALLY]

CIMAREX 2019 EQUITY INCENTIVE PLAN

RESTRICTED STOCK AWARD NOTICE OF GRANT AND AWARD AGREEMENT    Page 4 of 4 Pages

EX-10.5

CIMAREX ENERGY CO.

1700 Lincoln Street, Suite 3700

Denver, Colorado 80203-4553

NOTICE OF GRANT OF NONQUALIFIED STOCK OPTION

AND AWARD AGREEMENT

Option Holder: <first_name> <last_name>	Type of Option: Nonqualified stock option
Date of Grant: <award_date>	Option Price per share:  <award_price>
Number of shares: <shares_awarded>	Expiration Date:  7 years from Date of Grant
Vesting Schedule: One-third each year on anniversary of the Date of Grant

By accepting this agreement online, you and Cimarex Energy Co. (the “Company”) agree that this Option is granted under and governed by the terms and conditions of the Company’s 2019 Equity Incentive Plan and the Award Agreement (the “Agreement”), both of which are attached and made a part of this document. In the event of a conflict between the terms and conditions of the Plan and the terms and conditions of the Agreement, the terms and conditions of the Plan will prevail.

CIMAREX 2019 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION

NOTICE OF GRANT AND AWARD AGREEMENT         Page 1 of 1 Pages

AWARD AGREEMENT

1.Grant of Option. The Company grants you a Nonqualified Stock Option (the “Option”) to purchase the number of shares of Common Stock at the exercise price per share of Common Stock (the “Option Price”) as set forth in the attached Notice of Grant. The Option is not intended to qualify as an incentive stock option under Section 422 of the Internal Revenue Code of 1986, as amended (the “Code”).

2.Option Term; Expiration Date. The term of the Option is seven (7) years measured from the Date of Grant, unless sooner terminated under this Agreement or the Plan (the “Expiration Date”).

3.Vesting. The Option is only exercisable, in whole or in part, on or before the Expiration Date and then only with respect to the vested portion of the Option. Except as otherwise provided in this Agreement and the Plan, the Option vests and becomes exercisable to purchase shares of Common Stock as set forth in the Notice of Grant. Shares scheduled to vest on a certain date or upon the occurrence of a certain condition will not vest in accordance with any of the provisions of this Agreement unless you have been an employee (or other service provider) of the Company, a Subsidiary or an Affiliated Entity continuously from the Date of Grant until the date such vesting occurs.

4.Termination of Employment.

(a)    Death or Disability. If your employment with the Company terminates on account of death or Disability prior to the Option vesting, the Option will be fully vested and payable.

(b)    Other Terminations. If your employment with the Company terminates prior to the end of the vesting period for any reason other than death or Disability, whether or not your termination is voluntary or involuntary, the unvested portion of your Option will be forfeited.

5.Termination of Employment – Option Exercise. Except as otherwise set forth in this Agreement, the Option may be exercised upon termination of employment (or other service) on or before the Expiration Date as follows:

(a)Upon termination of employment on or after your 62^nd birthday or as a result of your death or Disability, the vested portion of the Option may be exercised by you (or your personal representative in the case of death) during the remaining term of the Option, but in no event after the Expiration Date.

(b)Upon your termination of employment (or other service) for any reason other than Cause, whether voluntary or involuntary, you may exercise the vested portion of the Option within three (3) months following the date of such termination, but in no event after the Expiration Date.

If your employment (or other service) with the Company is terminated for Cause prior to the Expiration Date, the entire Option, whether or not vested, shall become void, shall be forfeited and shall terminate immediately upon your termination of employment (or other service). For this purpose, Cause shall mean a conviction (or pleading nolo contendere) of a felony or termination of employment (or other service) due to a violation of the Company’s Code of Business Conduct and Ethics, as determined by the Committee (or its designee) in good faith.

CIMAREX 2019 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION

NOTICE OF GRANT AND AWARD AGREEMENT         Page 2 of 2 Pages

6.Change of Control. Upon the occurrence of a Change in Control, the unvested portion, if any, of an outstanding Option will become immediately and automatically vested. In addition, the Company or successor or purchaser may make provision for the assumption of the outstanding Option, the substitution of a new option for the outstanding Option on terms comparable to the outstanding Option, or the Committee, upon 45 days advance notice, may provide that any outstanding Option will expire. The Committee need not take the same action with respect to all outstanding Options.

7.Exercising the Option. The Option may be exercised on or before the Expiration Date in accordance with the Plan and the terms of this Agreement. The Option may be exercised by delivery of a Notice of Exercise to the Company’s Corporate Secretary (or his or her designee) and full payment of the Option Price and satisfaction of applicable tax withholding. The Notice of Exercise must identify the Option being exercised, the number of shares of Common Stock to be purchased and include any other information, and be in the form required by the Committee (or its designee) from time to time (the “Notice of Exercise”).

8.Tax Withholding. The issuance of Common Stock pursuant to the exercise of the Option is subject to the requirement that you make appropriate arrangements with the Company to provide for the amount of additional income and other tax withholding applicable to the exercise of the Option. Subject to any election procedures and other requirements determined by the Company, you may pay the amount of taxes required by law to be withheld by directing the Company to withhold a number of shares of Common Stock having a Fair Market Value on the date of payment equal to the amount of the required tax withholding.

9.Method of Payment. The Option Price and tax withholding for shares of Common Stock purchased upon the exercise of the Option may be paid by the following methods:

(a)in cash or by check, bank draft or money order payable to the order of the Company;

(b)by delivering shares of Common Stock with a Fair Market Value on the date of payment equal to the amount of the Option Price, subject to such additional requirements determined by the Committee (or its designee);

(c)payment through a transaction involving a licensed broker or dealer (acceptable to the Company) acting on your behalf to sell shares and deliver all or part of the sales proceeds to the Company in payment of the Option Price and applicable tax withholding, subject to such additional requirements determined by the Committee (or its designee);

(d)payment of the exercise price and required tax withholding with shares of Common Stock acquired pursuant to the exercise (the Common Stock being valued at Fair Market Value on the date of exercise);

(e)a combination of the foregoing; or

(f)any other method of payment adopted by the Company in connection with the Plan and approved by the Committee prior to the time of exercise.

10.Transferability. You may not transfer the Option except by will or pursuant to the laws of descent and distribution, nor may you pledge, hypothecate or otherwise dispose of the Option, by operation of law or otherwise. The Option may be exercised during your life only by you, or in the event of your

CIMAREX 2019 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION

NOTICE OF GRANT AND AWARD AGREEMENT         Page 3 of 3 Pages

Disability or incapacity, by your guardian or legal representative and after your death, only by those entitled to do so under your will or the applicable laws of descent and distribution.    

11.Rights as Stockholder. Neither you nor your successor shall have any right as a stockholder with respect to the shares of Common Stock covered by this Option prior to your purchase of the shares of Common Stock by exercise of the Option, including, but not limited to, the right to vote the shares or receive dividends or dividend equivalents.

12.Miscellaneous.

(a)Adjustments. The Plan provides for certain adjustments to the number of shares of Common Stock covered by the Option, the Option Price and other changes in connection with a reorganization or other changes to the Common Stock.

(b)Change of Control. The Plan describes the actions that may be taken by the Committee with respect to the Option upon the occurrence of a Change of Control Event.

(c)Restrictions on Common Stock. Any shares of Common Stock acquired under the Option or otherwise by you are subject to the Company’s Insider Trading Policy and may be subject to other restrictions on resale. Any sale or other disposition of shares by you must be made in compliance with the Company’s Insider Trading Policy, in effect from time to time, securities law and other applicable legal requirements.

(d)Electronic Delivery. The Company may, in its sole discretion, decide to deliver any documents related to Options awarded under the Plan or future Options that may be awarded under the Plan by electronic means. You hereby consent to receive such documents by electronic delivery and agree to participate in the Plan through any on-line or electronic system established and maintained by the Company or another third party designated by the Company.

(e)Amendment or Modifications to the Agreement. This Agreement constitutes the entire understanding of the parties on the subjects covered. You expressly warrant that you are not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Except as provided in the Plan or elsewhere in this Agreement, modifications to this Agreement or the Plan may only be made in writing and signed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without your consent, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with this Option.

(f)Amendment or Termination of the Plan. By accepting this Option, you expressly warrant that you have received an Option under the Plan, and have received, read and are familiar with the terms of the Plan. You understand that the Plan is discretionary in nature and that it may be amended, suspended or terminated by the Company at any time.

(g)Defined Terms. Capitalized terms have the meaning set forth in the Plan or herein, as the case may be.

CIMAREX 2019 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION

NOTICE OF GRANT AND AWARD AGREEMENT         Page 4 of 4 Pages

(h)Compliance with Securities Laws. This Agreement shall be subject to the requirement that if at any time counsel to the Company determines that the listing, registration or qualification of the shares of Common Stock subject to the Option upon any securities exchange or under any state or federal law, or the consent or approval of any governmental or regulatory body, is necessary as a condition of, or in connection with, the issuance or purchase of such shares thereunder, the Option may not be exercised in whole or in part unless such listing, registration, qualification, consent or approval shall have been effected or obtained on conditions acceptable to the Committee. Nothing herein shall be deemed to require the Company to apply for, obtain, or keep current, any such listing, registration or qualification.

(i)Construction; Severability. The section headings contained herein are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and each other provision of this Agreement shall be severable and enforceable to the extent permitted by law.

(j)Waiver. Any provision contained in this Agreement may be waived, either generally or in any particular instance, by the Committee appointed under the Plan, but only to the extent permitted under the Plan.

(k)Binding Effect. Subject to the limits on the transferability of the Option, this Agreement shall be binding upon and inure to the benefit of the Company and you and their respective heirs, executors, administrators, legal representatives, successors and assigns.

(l)No Right to Continued Employment. Nothing contained in this Agreement or the Plan shall be construed as giving you any right to remain employed by (or provide other service to) the Company, any Subsidiary or any Affiliated Entity. The Company reserves the right to terminate your employment (or other service) at any time.

(m)Notices. Any notice required or permitted to be given under this Agreement shall be in writing and shall be delivered electronically, personally or mailed (U.S. Mail) by the Company to you at your then current address as maintained by the Company or such other address as you may advise the Company in writing. Any such notice shall be deemed to have been given as of the second day after deposit in the United States mails, postage prepaid, properly addressed as set forth in this paragraph, in the case of a mailed notice, or as of the date delivered in the case of electronic or personal delivery.

(n)Governing Law. This Agreement and the Plan shall be governed by and construed in accordance with the laws of the State of Delaware except as superseded by applicable Federal law.

Attachments:

These documents constitute part of a prospectus covering securities that have been registered under the Securities Act of 1933.

Cimarex Energy Co. 2019 Equity Incentive Plan

Summary of the Cimarex Energy Co. 2019 Equity Incentive Plan

Form 10-K and other periodic reports [SEC Filings]

CIMAREX 2019 EQUITY INCENTIVE PLAN NONQUALIFIED STOCK OPTION

NOTICE OF GRANT AND AWARD AGREEMENT         Page 5 of 5 Pages

EX-31.1

Exhibit 31.1

I, Thomas E. Jorden, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cimarex Energy Co.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance  with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 5, 2019
	/s/ Thomas E. Jorden
	Name:	Thomas E. Jorden
	Title:	Chairman, President and Chief Executive Officer

EX-31.2

Exhibit 31.2

I, G. Mark Burford, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Cimarex Energy Co.;

2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4) The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have;

a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance  with generally accepted accounting principles;

c) evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures as of the end of the period covered by this report based on such evaluation; and

d) disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5) The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of registrant’s board of directors (or persons performing the equivalent functions):

a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated: August 5, 2019
	/s/ G. Mark Burford
	Name:	G. Mark Burford
	Title:	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Cimarex Energy Co. (the Company), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the Report) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2019
	/s/ Thomas E. Jorden
	Name:	Thomas E. Jorden
	Title:	Chairman, President and Chief Executive Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as a separate disclosure document.

EX-32.2

Exhibit 32.2

Certification

Pursuant to 18 U.S.C. § 1350, the undersigned officer of Cimarex Energy Co. (the Company), hereby certifies, to such officer’s knowledge, that the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2019 (the Report) fully complies with the requirements of Section 13(a) or 15(d), as applicable, of the Securities Exchange Act of 1934, and that the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Dated: August 5, 2019
	/s/ G. Mark Burford
	Name:	G. Mark Burford
	Title:	Senior Vice President and Chief Financial Officer

The foregoing certification is being furnished solely pursuant to 18 U.S.C. § 1350 and is not being filed as a separate disclosure document.

XML

Cover Page - shares	6 Months Ended
	Jun. 30, 2019	Jul. 31, 2019
Cover page.
Entity Central Index Key	0001168054
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q2
Amendment Flag	false
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Jun. 30, 2019
Document Transition Report	false
Entity File Number	001-31446
Entity Registrant Name	CIMAREX ENERGY CO
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	45-0466694
Entity Address, Address Line One	1700 Lincoln Street, Suite 3700
Entity Address, City or Town	Denver
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80203
City Area Code	303
Local Phone Number	295-3995
Title of 12(b) Security	Common Stock ($0.01 par value)
Trading Symbol	XEC
Security Exchange Name	NYSE
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		101,457,009

XML

CONDENSED CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Current assets:
Cash and cash equivalents	$ 19,414	$ 800,666
Accounts receivable, net of allowance:
Trade	111,745	122,065
Oil and gas sales	267,821	315,063
Gas gathering, processing, and marketing	7,796	17,072
Oil and gas well equipment and supplies	58,306	55,553
Derivative instruments	42,957	101,939
Prepaid expenses	8,985	7,554
Other current assets	3,032	4,227
Total current assets	520,056	1,424,139
Oil and gas properties at cost, using the full cost method of accounting:
Proved properties	19,846,426	18,566,757
Unproved properties and properties under development, not being amortized	1,564,074	436,325
Gross oil and gas properties	21,410,500	19,003,082
Less—accumulated depreciation, depletion, amortization, and impairment	(15,659,363)	(15,287,752)
Net oil and gas properties	5,751,137	3,715,330
Fixed assets, net of accumulated depreciation of $356,631 and $324,631, respectively	526,429	257,686
Goodwill	727,573	620,232
Derivative instruments	613	9,246
Other assets	70,126	35,451
Total assets	7,595,934	6,062,084
Accounts payable:
Trade	104,142	76,927
Gas gathering, processing, and marketing	14,934	29,887
Accrued liabilities:
Exploration and development	108,299	124,674
Taxes other than income	38,201	33,622
Other	250,710	221,159
Derivative instruments	50,056	27,627
Revenue payable	186,206	194,811
Operating leases	62,119	0
Total current liabilities	814,667	708,707
Long-term debt principal	2,000,000	1,500,000
Less—unamortized debt issuance costs and discounts	(15,770)	(11,446)
Long-term debt, net	1,984,230	1,488,554
Deferred income taxes	439,429	334,473
Asset retirement obligation	157,381	152,758
Derivative instruments	840	2,267
Operating leases	191,413	0
Other liabilities	64,461	45,539
Total liabilities	3,652,421	2,732,298
Commitments and contingencies (Note 10)
Redeemable preferred stock - 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, $0.01 par value, 62,500 shares authorized and issued and no shares authorized and issued, respectively (Note 5)	81,620	0
Stockholders’ equity:
Common stock, $0.01 par value, 200,000,000 shares authorized, 101,473,177 and 95,755,797 shares issued, respectively	1,015	958
Additional paid-in capital	3,223,331	2,785,188
Retained earnings	635,339	542,885
Accumulated other comprehensive income	2,208	755
Total stockholders’ equity	3,861,893	3,329,786
Total liabilities and stockholders' equity	$ 7,595,934	$ 6,062,084

XML

CONDENSED CONSOLIDATED BALANCE SHEETS (Parenthetical) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Statement of Financial Position [Abstract]
Accumulated depreciation on fixed assets	$ 356,631	$ 324,631
Redeemable preferred stock dividend rate (as a percent)	8.125%	8.125%
Redeemable preferred stock, par value (USD per share)	$ 0.01	$ 0.01
Redeemable preferred stock authorized (shares)	62,500	0
Redeemable preferred stock issued (shares)	62,500	0
Common stock, par value (USD per share)	$ 0.01	$ 0.01
Common stock authorized (shares)	200,000,000	200,000,000
Common stock issued (shares)	101,473,177	95,755,797

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Revenues:
Revenues	$ 546,463	$ 556,274	$ 1,123,420	$ 1,123,408
Costs and expenses:
Depreciation, depletion, and amortization	213,327	143,388	403,744	276,247
Asset retirement obligation	2,157	2,053	4,206	3,113
Production	87,726	79,215	164,959	150,486
Transportation, processing, and other operating	48,331	51,933	101,939	97,098
Gas gathering and other	13,605	9,467	25,925	19,290
Taxes other than income	41,033	27,930	74,727	58,118
General and administrative	24,911	19,739	53,995	43,060
Stock compensation	6,494	3,095	13,207	9,825
(Gain) loss on derivative instruments, net	(40,768)	21,699	74,684	17,540
Other operating expense, net	590	5,252	8,916	5,455
Total costs and expenses	397,406	363,771	926,302	680,232
Operating income	149,057	192,503	197,118	443,176
Other (income) and expense:
Interest expense	24,674	16,895	45,079	33,678
Capitalized interest	(16,805)	(4,850)	(25,547)	(9,660)
Loss on early extinguishment of debt	0	0	4,250	0
Other, net	(2,167)	(2,605)	(4,408)	(7,172)
Income before income tax	143,355	183,063	177,744	426,330
Income tax expense	34,046	42,066	42,119	99,015
Net income	$ 109,309	$ 140,997	$ 135,625	$ 327,315
Earnings per share to common stockholders:
Basic (USD per share)	$ 1.07	$ 1.48	$ 1.34	$ 3.44
Diluted (USD per share)	$ 1.07	$ 1.48	$ 1.34	$ 3.44
Comprehensive income:
Net income	$ 109,309	$ 140,997	$ 135,625	$ 327,315
Other comprehensive income:
Change in fair value of investments, net of tax of $89, $57, $428 and $1, respectively	304	192	1,453	2
Total comprehensive income	109,613	141,189	137,078	327,317
Oil sales
Revenues:
Revenues	411,766	342,184	761,072	693,907
Gas and NGL sales
Revenues:
Revenues	126,044	202,202	343,959	405,920
Gas gathering and other
Revenues:
Revenues	9,769	11,810	20,031	23,262
Gas marketing
Revenues:
Revenues	$ (1,116)	$ 78	$ (1,642)	$ 319

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Parenthetical) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Statement [Abstract]
Change in fair value investments, tax	$ 89	$ 57	$ 428	$ 1

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash flows from operating activities:
Net income	$ 135,625	$ 327,315
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, and amortization	403,744	276,247
Asset retirement obligation	4,206	3,113
Deferred income taxes	42,119	99,732
Stock compensation	13,207	9,825
Loss on derivative instruments, net	74,684	17,540
Settlements on derivative instruments	(2,814)	(19,919)
Loss on early extinguishment of debt	4,250	0
Amortization of debt issuance costs and discounts	1,502	1,456
Changes in non-current assets and liabilities	2,749	713
Other, net	8,152	723
Changes in operating assets and liabilities:
Accounts receivable	117,692	15,012
Other current assets	(761)	1,886
Accounts payable and other current liabilities	(140,272)	(29,304)
Net cash provided by operating activities	664,083	704,339
Cash flows from investing activities:
Acquisition of Resolute Energy, net of cash acquired (Note 13)	(284,441)	0
Oil and gas capital expenditures	(711,757)	(650,807)
Other capital expenditures	(40,141)	(56,112)
Sales of oil and gas assets	13,233	34,842
Sales of other assets	434	525
Net cash used by investing activities	(1,022,672)	(671,552)
Cash flows from financing activities:
Borrowings of long-term debt	1,710,310	0
Repayments of long-term debt	(2,081,000)	0
Financing, underwriting, and debt redemption fees	(11,791)	0
Finance lease payments	(1,555)	0
Dividends paid	(38,647)	(22,801)
Employee withholding taxes paid upon the net settlement of equity-classified stock awards	(654)	(946)
Proceeds from exercise of stock options	674	1,249
Net cash used by financing activities	(422,663)	(22,498)
Net change in cash and cash equivalents	(781,252)	10,289
Cash and cash equivalents at beginning of period	800,666	400,534
Cash and cash equivalents at end of period	$ 19,414	$ 410,823

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Retained Earnings (Accumulated Deficit)	Accumulated Other Comprehensive Income
Balance at beginning of period (shares) at Dec. 31, 2017		95,437
Balance at beginning of period at Dec. 31, 2017	$ 2,568,278	$ 954	$ 2,764,384	$ (199,259)	$ 2,199
Increase (Decrease) in Stockholders' Equity
Dividends paid on stock awards subsequently forfeited	7		3	4
Dividends declared on common stock	(15,271)		(15,271)
Net income	186,318			186,318
Unrealized change in fair value of investments, net of tax	(190)				(190)
Issuance of restricted stock awards (shares)		2
Issuance of restricted stock awards	0
Common stock reacquired and retired (shares)		(3)
Common stock reacquired and retired	(305)		(305)
Restricted stock forfeited and retired (shares)		(7)
Restricted stock forfeited and retired	0
Exercise of stock options (shares)		4
Exercise of stock options	345		345
Stock-based compensation	12,411		12,411
Balance at end of period (shares) at Mar. 31, 2018		95,433
Balance at end of period at Mar. 31, 2018	2,751,593	$ 954	2,761,567	(12,937)	2,009
Balance at beginning of period (shares) at Dec. 31, 2017		95,437
Balance at beginning of period at Dec. 31, 2017	2,568,278	$ 954	2,764,384	(199,259)	2,199
Increase (Decrease) in Stockholders' Equity
Net income	327,315
Unrealized change in fair value of investments, net of tax	2
Balance at end of period (shares) at Jun. 30, 2018		95,393
Balance at end of period at Jun. 30, 2018	2,886,498	$ 954	2,770,532	112,811	2,201
Balance at beginning of period (shares) at Mar. 31, 2018		95,433
Balance at beginning of period at Mar. 31, 2018	2,751,593	$ 954	2,761,567	(12,937)	2,009
Increase (Decrease) in Stockholders' Equity
Dividends paid on stock awards subsequently forfeited	39		26	13
Dividends declared on common stock	(15,241)		21	(15,262)
Net income	140,997			140,997
Unrealized change in fair value of investments, net of tax	192				192
Issuance of restricted stock awards (shares)		27
Issuance of restricted stock awards	0
Common stock reacquired and retired (shares)		(5)
Common stock reacquired and retired	(641)		(641)
Restricted stock forfeited and retired (shares)		(75)
Restricted stock forfeited and retired	0
Exercise of stock options (shares)		13
Exercise of stock options	904		904
Stock-based compensation	8,655		8,655
Balance at end of period (shares) at Jun. 30, 2018		95,393
Balance at end of period at Jun. 30, 2018	2,886,498	$ 954	2,770,532	112,811	2,201
Balance at beginning of period (shares) at Dec. 31, 2018		95,756
Balance at beginning of period at Dec. 31, 2018	3,329,786	$ 958	2,785,188	542,885	755
Increase (Decrease) in Stockholders' Equity
Dividends paid on stock awards subsequently forfeited	2			2
Dividends declared on common stock	(20,308)			(20,308)
Dividends declared on redeemable preferred stock ($20.31 per share)	(1,269)			(1,269)
Net income	26,316			26,316
Issuance of stock for Resolute Energy acquisition (Note 13) (shares)		5,652
Issuance of stock for Resolute Energy acquisition (Note 13)	413,015	$ 56	412,959
Unrealized change in fair value of investments, net of tax	1,149				1,149
Issuance of restricted stock awards (shares)		11
Issuance of restricted stock awards	0
Common stock reacquired and retired (shares)		(10)
Common stock reacquired and retired	(654)		(654)
Restricted stock forfeited and retired (shares)		(4)
Restricted stock forfeited and retired	0
Exercise of stock options (shares)		3
Exercise of stock options	80		80
Stock-based compensation	13,245		13,245
Balance at end of period (shares) at Mar. 31, 2019		101,408
Balance at end of period at Mar. 31, 2019	3,761,362	$ 1,014	3,210,818	547,626	1,904
Balance at beginning of period (shares) at Dec. 31, 2018		95,756
Balance at beginning of period at Dec. 31, 2018	3,329,786	$ 958	2,785,188	542,885	755
Increase (Decrease) in Stockholders' Equity
Net income	135,625
Unrealized change in fair value of investments, net of tax	1,453
Balance at end of period (shares) at Jun. 30, 2019		101,473
Balance at end of period at Jun. 30, 2019	3,861,893	$ 1,015	3,223,331	635,339	2,208
Balance at beginning of period (shares) at Mar. 31, 2019		101,408
Balance at beginning of period at Mar. 31, 2019	3,761,362	$ 1,014	3,210,818	547,626	1,904
Increase (Decrease) in Stockholders' Equity
Dividends paid on stock awards subsequently forfeited	5		1	4
Dividends declared on common stock	(20,330)			(20,330)
Dividends declared on redeemable preferred stock ($20.31 per share)	(1,270)			(1,270)
Net income	109,309			109,309
Unrealized change in fair value of investments, net of tax	304				304
Issuance of restricted stock awards (shares)		54
Issuance of restricted stock awards	0	$ 1	(1)
Restricted stock forfeited and retired (shares)		(4)
Restricted stock forfeited and retired	0
Exercise of stock options (shares)		15
Exercise of stock options	594		594
Stock-based compensation	11,919		11,919
Balance at end of period (shares) at Jun. 30, 2019		101,473
Balance at end of period at Jun. 30, 2019	$ 3,861,893	$ 1,015	$ 3,223,331	$ 635,339	$ 2,208

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CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (Parenthetical) - $ / shares	3 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018
Common Stock
Dividends declared per common share (USD per share)	$ 0.2	$ 0.20	$ 0.16	$ 0.16
Preferred Stock
Dividends declared per preferred share (USD per share)	$ 20.31	$ 20.31

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BASIS OF PRESENTATION

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

BASIS OF PRESENTATION

BASIS OF PRESENTATION

Cimarex Energy Co. (“Cimarex,” “we,” or “us”), a Delaware corporation, is an independent oil and gas exploration and production company. Our operations are mainly located in Texas, Oklahoma, and New Mexico. 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, 2018.

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 2019 financial statement presentation.

On March 1, 2019, we acquired Resolute Energy Corporation (“Resolute”) in a cash and stock transaction. The results of Resolute’s operations have been included in our consolidated financial statements since the March 1, 2019 acquisition date. See Note 13 for more information on this transaction.

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, the estimation of future abandonment obligations used in recording asset retirement obligations, and the assessment of goodwill. Estimates and judgments also are required in determining allowances for doubtful accounts, impairments of unproved properties and other assets, valuation of deferred tax assets, fair value measurements, and contingencies.

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 estimated selling prices in the ordinary course of business, less reasonably predictable costs of 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. The calculated ceiling limitation is not intended to be indicative of the fair market value of our proved reserves or future results.

We did not recognize a ceiling test impairment during the three and six months ended June 30, 2019 and 2018 because the net capitalized cost of our oil and gas properties, as adjusted for income taxes, did not exceed the ceiling limitation. However, at June 30, 2019, a decline in the value of our ceiling limitation of approximately 4% or more would have resulted in an impairment. If pricing conditions deteriorate, including the further widening of local market basis differentials, or if there is a negative impact on one or more of the other components of the calculation, we may incur full cost ceiling test impairments in future quarters. 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.

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, 2019, 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.

Our gas and NGLs are sold under a limited number of contract structure types common in our industry. Under these contracts the gas and its components, including NGLs, may be sold to a single purchaser or the residue gas and NGLs may be sold to separate purchasers. Regardless of the contract structure type, the terms of these contracts compensate us for the value of the residue gas and NGLs at current market prices for each product. However, depending on the contract structure type, certain transportation, processing, and other charges may be deducted against the prices received for the product. Our oil typically is sold at specific delivery points under contract terms that also are common in our industry.

Gas Gathering

When we transport and/or process 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 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 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.

Lease Accounting

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”).  The FASB subsequently issued various ASUs which provided additional implementation guidance. Topic 842 requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for a period of time. The scope of Topic 842 excludes leases to explore for or use minerals, oil, natural gas, and similar nonregenerative resources. We adopted Topic 842 effective January 1, 2019, using the modified retrospective method applied to all leases that existed on that date, which resulted in the recognition of lease liabilities of $276.9 million and right-of-use assets of $265.0 million. In connection with adoption we made use of the following practical expedients, which are provided in Topic 842:

• a package of practical expedients to not reassess: 1) whether expired or existing contracts are or contain a lease, 2) lease classification for expired or existing leases, and 3) initial direct costs for existing leases;

• an election not to apply the recognition requirements in Topic 842 to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise);

• a practical expedient that permits combining lease and nonlease components in a contract and accounting for the combination as a lease (elected by asset class); and

•

a practical expedient to not reassess certain land easements in existence prior to January 1, 2019.

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LONG-TERM DEBT

6 Months Ended

Jun. 30, 2019

Long-term Debt, Unclassified [Abstract]

LONG-TERM DEBT

LONG-TERM DEBT

Long-term debt at June 30, 2019 and December 31, 2018 consisted of the following:

	June 30, 2019							December 31, 2018
(in thousands)	Principal		Unamortized Debt Issuance Costs and Discounts (1)			Long-term Debt, net		Principal		Unamortized Debt Issuance Costs and Discount (1)			Long-term Debt, net
4.375% Notes due 2024	$	750,000	$	(3,982	)	$	746,018	$	750,000	$	(4,439	)	$	745,561
3.90% Notes due 2027	750,000		(6,651		)	743,349		750,000		(7,007		)	742,993
4.375% Notes due 2029	500,000		(5,137		)	494,863		—		—			—
	$	2,000,000	$	(15,770	)	$	1,984,230	$	1,500,000	$	(11,446	)	$	1,488,554

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(1) At June 30, 2019, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.1 million and $1.5 million, respectively. At December 31, 2018, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.4 million and $1.6 million, respectively. At June 30, 2019, the unamortized debt issuance costs and discount related to the 4.375% Notes due 2029 were $4.5 million and $0.7 million, respectively. The 4.375% Notes due 2024 were issued at par.

Bank Debt

On February 5, 2019, we entered into an Amended and Restated Credit Agreement for our senior unsecured revolving credit facility (“Credit Facility”). Among other things, the amended and restated credit facility increased the aggregate commitments to $1.25 billion with an option for us to increase the aggregate commitments to $1.5 billion, and extended the maturity date to February 5, 2024. As of June 30, 2019, 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. During the three months ended June 30, 2019, we borrowed and repaid an aggregate of $528.0 million on the Credit Facility to meet cash requirements as needed.

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-capital ratio of no greater than 65%. As of June 30, 2019, we were in compliance with all of the financial covenants.

At June 30, 2019 and December 31, 2018, we had $4.6 million and $2.2 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. We incurred $3.0 million in additional debt issuance costs in amending our Credit Facility.

Senior Notes

On March 8, 2019, we issued $500 million aggregate principal amount of 4.375% senior unsecured notes due March 15, 2029 at 99.862% of par to yield 4.392% per annum.  We received $494.7 million in net cash proceeds, after deducting underwriters’ fees, discount, and debt issuance costs.  The notes bear an annual interest rate of 4.375% and interest is payable semiannually on March 15 and September 15, with the first payment due September 15, 2019.  We used the net proceeds to repay borrowings that were outstanding under our Credit Facility that were used to help fund the Resolute acquisition on March 1, 2019. 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 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 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, 2019.

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DERIVATIVE INSTRUMENTS

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedges, Assets [Abstract]

DERIVATIVE INSTRUMENTS

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, 2019, we have entered into oil and gas collars, oil basis swaps, oil and gas fixed price swaps, and sold oil calls. 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. Under our fixed price swaps, we receive the difference between the fixed price and the published index price if the published index price is below the fixed price and we pay the difference between the fixed price and the published index price if the published index price is above the fixed price. Under our sold oil calls, we pay the difference between the fixed price and the published index price if the published index price is above the fixed price. The following tables summarize our outstanding derivative contracts as of June 30, 2019:

Oil Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		3,312,000		2,576,000		5,888,000
Weighted Avg Price - Floor	$	—	$	—	$	54.28	$	55.50	$	54.81
Weighted Avg Price - Ceiling	$	—	$	—	$	67.88	$	68.36	$	68.09
2020:
WTI (1)
Volume (Bbls)	1,820,000		1,092,000		368,000		368,000		3,648,000
Weighted Avg Price - Floor	$	54.90	$	51.50	$	50.00	$	50.00	$	52.89
Weighted Avg Price - Ceiling	$	68.49	$	63.59	$	62.15	$	62.15	$	65.74

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(1) The index price for these collars is West Texas Intermediate (“WTI”) as quoted on the New York Mercantile Exchange (“NYMEX”).

Gas Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
PEPL (1)
Volume (MMBtu)	—		—		12,880,000		10,120,000		23,000,000
Weighted Avg Price - Floor	$	—	$	—	$	1.93	$	1.92	$	1.92
Weighted Avg Price - Ceiling	$	—	$	—	$	2.32	$	2.36	$	2.33
Perm EP (2)
Volume (MMBtu)	—		—		8,280,000		5,520,000		13,800,000
Weighted Avg Price - Floor	$	—	$	—	$	1.46	$	1.38	$	1.43
Weighted Avg Price - Ceiling	$	—	$	—	$	1.76	$	1.71	$	1.74
Waha (3)
Volume (MMBtu)	—		—		5,520,000		5,520,000		11,040,000
Weighted Avg Price - Floor	$	—	$	—	$	1.48	$	1.48	$	1.48
Weighted Avg Price - Ceiling	$	—	$	—	$	1.82	$	1.82	$	1.82
2020:
PEPL (1)
Volume (MMBtu)	7,280,000		4,550,000		1,840,000		1,840,000		15,510,000
Weighted Avg Price - Floor	$	1.93	$	1.91	$	1.85	$	1.85	$	1.91
Weighted Avg Price - Ceiling	$	2.36	$	2.28	$	2.31	$	2.31	$	2.32
Perm EP (2)
Volume (MMBtu)	3,640,000		2,730,000		1,840,000		1,840,000		10,050,000
Weighted Avg Price - Floor	$	1.40	$	1.40	$	1.35	$	1.35	$	1.38
Weighted Avg Price - Ceiling	$	1.79	$	1.82	$	1.66	$	1.66	$	1.75
Waha (3)
Volume (MMBtu)	4,550,000		2,730,000		—		—		7,280,000
Weighted Avg Price - Floor	$	1.50	$	1.57	$	—	$	—	$	1.53
Weighted Avg Price - Ceiling	$	1.87	$	1.97	$	—	$	—	$	1.91

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(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.

Oil Basis Swaps	First Quarter		Second Quarter		Third Quarter			Fourth Quarter			Total
2019:
WTI Midland (1)
Volume (Bbls)	—		—		3,266,000			3,266,000			6,532,000
Weighted Avg Differential (2)	$	—	$	—	$	(7.36	)	$	(6.32	)	$	(6.84	)
2020:
WTI Midland (1)
Volume (Bbls)	2,093,000		1,365,000		736,000			736,000			4,930,000
Weighted Avg Differential (2)	$	0.16	$	0.19	$	0.71		$	0.71		$	0.33

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(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 Swaps	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		460,000		460,000		920,000
Weighted Avg Price	$	—	$	—	$	64.54	$	64.54	$	64.54

________________________________________

(1) The fixed price on these swaps is NYMEX WTI.

Gas Swaps	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
Henry Hub (1)
Volume (MMBtu)	—		—		3,220,000		3,220,000		6,440,000
Weighted Avg Price	$	—	$	—	$	3.00	$	3.00	$	3.00

________________________________________

(1) The fixed price on these swaps is NYMEX Henry Hub.

Sold Oil Calls	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		337,640		337,640		675,280
Weighted Avg Call Price	$	—	$	—	$	64.36	$	64.36	$	64.36

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(1) The index on these sold calls is NYMEX WTI.

The following table summarizes our derivative contracts entered into subsequent to June 30, 2019 through August 1, 2019:

Oil Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI
Volume (Bbls)	—		—		368,000		368,000		736,000
Wtd Avg Price - Floor	$	—	$	—	$	50.00	$	50.00	$	50.00
Wtd Avg Price - Ceiling	$	—	$	—	$	63.45	$	63.45	$	63.45
2020:
WTI
Volume (Bbls)	364,000		364,000		368,000		368,000		1,464,000
Wtd Avg Price - Floor	$	50.00	$	50.00	$	50.00	$	50.00	$	50.00
Wtd Avg Price - Ceiling	$	63.45	$	63.45	$	63.45	$	63.45	$	63.45

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 (Gain) loss on derivative instruments, net for the periods indicated.

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
(Increase) decrease in fair value of derivative instruments, net:
Gas contracts	$	(6,370	)	$	14,566		$	(16,216	)	$	2,777
Oil contracts	(28,161		)	(397		)	88,086			(5,156		)
	(34,531		)	14,169			71,870			(2,379		)
Cash (receipts) payments on derivative instruments, net:
Gas contracts	(21,176		)	(9,918		)	(17,412		)	(15,037		)
Oil contracts	14,939			17,448			20,226			34,956
	(6,237		)	7,530			2,814			19,919
(Gain) loss on derivative instruments, net	$	(40,768	)	$	21,699		$	74,684		$	17,540

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, 2019 and December 31, 2018, as well as the potential effect of netting arrangements on our recognized derivative asset and liability amounts.

		June 30, 2019
(in thousands)	Balance Sheet Location	Asset			Liability
Oil contracts	Current assets — Derivative instruments	$	23,060		$	—
Gas contracts	Current assets — Derivative instruments	19,897			—
Oil contracts	Non-current assets — Derivative instruments	613			—
Oil contracts	Current liabilities — Derivative instruments	—			50,056
Oil contracts	Non-current liabilities — Derivative instruments	—			171
Gas contracts	Non-current liabilities — Derivative instruments	—			669
Total gross amounts presented in the balance sheet		43,570			50,896
Less: gross amounts not offset in the balance sheet		(23,966		)	(23,966		)
Net amount		$	19,604		$	26,930
		December 31, 2018
(in thousands)	Balance Sheet Location	Asset			Liability
Oil contracts	Current assets — Derivative instruments	$	94,240		$	—
Gas contracts	Current assets — Derivative instruments	7,699			—
Oil contracts	Non-current assets — Derivative instruments	9,246			—
Oil contracts	Current liabilities — Derivative instruments	—			23,378
Gas contracts	Current liabilities — Derivative instruments	—			4,249
Oil contracts	Non-current liabilities — Derivative instruments	—			311
Gas contracts	Non-current liabilities — Derivative instruments	—			1,956
Total gross amounts presented in the balance sheet		111,185			29,894
Less: gross amounts not offset in the balance sheet		(29,894		)	(29,894		)
Net amount		$	81,291		$	—

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.

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FAIR VALUE MEASUREMENTS

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

FAIR VALUE MEASUREMENTS

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 (exit price). The FASB 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 are inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. Level 3 are unobservable inputs for an asset or liability.

The following table provides fair value measurement information for certain assets and liabilities as of June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
(in thousands)	Book Value			Fair Value			Book Value			Fair Value
Financial Assets (Liabilities):
4.375% Notes due 2024	$	(750,000	)	$	(793,913	)	$	(750,000	)	$	(744,578	)
3.90% Notes due 2027	$	(750,000	)	$	(769,643	)	$	(750,000	)	$	(701,273	)
4.375% Notes due 2029	$	(500,000	)	$	(530,535	)	$	—		$	—
Derivative instruments — assets	$	43,570		$	43,570		$	111,185		$	111,185
Derivative instruments — liabilities	$	(50,896	)	$	(50,896	)	$	(29,894	)	$	(29,894	)

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, 2019 were accrued operating expenses (e.g. production, transportation, and gathering expenses) of approximately $82.8 million. Included in “Accrued liabilities — Other” at December 31, 2018 were: (i) accrued operating expenses of approximately $69.1 million, (ii) accrued general and administrative, primarily payroll-related, costs of approximately $47.4 million, and (iii) an accrual of approximately $35.8 million representing the amount by which checks issued, but not yet presented to our banks, exceeded balances in applicable bank accounts.

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.

We routinely assess the recoverability of all material accounts receivable to determine their collectability. We accrue a reserve to the allowance for doubtful accounts when it is probable that a receivable will not be collected and the amount of the reserve may be reasonably estimated. At June 30, 2019 and December 31, 2018, the allowance for doubtful accounts was $3.2 million and $2.7 million, respectively.

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CAPITAL STOCK

6 Months Ended

Jun. 30, 2019

Stockholders' Equity Note [Abstract]

CAPITAL STOCK

CAPITAL STOCK

Authorized capital stock consists of 200 million shares of common stock and 15 million shares of preferred stock. At June 30, 2019, there were 101.5 million shares of common stock outstanding.

From the 15 million shares of preferred stock authorized, our Board of Directors created a series of preferred stock designated as 8.125% Series A Cumulative Perpetual Convertible Preferred Stock and authorized 62.5 thousand shares. In March 2019, in conjunction with the Resolute acquisition (see Note 13), we issued 62.5 thousand shares of 8.125% Series A Cumulative Perpetual Convertible Preferred Stock, par value $0.01 per share (the “Convertible Preferred Stock”). Holders of the Convertible Preferred Stock are entitled to receive, when, as, and if declared by the Board out of funds of Cimarex legally available for payment, cumulative cash dividends at the annual rate of 8.125% of each share’s liquidation preference of $1,000. Dividends on the preferred stock are payable quarterly in arrears and accumulate from the most recent date as to which dividends have been paid. In the event of any liquidation, winding up, or dissolution of Cimarex, whether voluntary or involuntary, each holder will be entitled to receive in respect of its shares and to be paid out of the assets of Cimarex legally available for distribution to its stockholders, after satisfaction of liabilities to Cimarex’s creditors and any senior stock (of which there is currently none) and before any payment or distribution is made to holders of junior stock (including common stock), the liquidation preference of $1,000 per share, with the total liquidation preference being $62.5 million in the aggregate. Each holder has the right at any time, at its option, to convert any or all of such holder’s shares of Convertible Preferred Stock at an initial conversion rate of 8.0421 shares of fully paid and nonassessable shares of our common stock and $471.40 in cash per share of Convertible Preferred Stock. Additionally, at any time on or after October 15, 2021, we shall have the right, at our option, if the closing sale price of our common stock meets certain criteria, to elect to cause all, and not part, of the outstanding shares of Convertible Preferred Stock to be automatically converted into that number of shares of Cimarex common stock for each share of Convertible Preferred Stock equal to the conversion rate in effect on the mandatory conversion date as such terms are defined in the Certificate of Designations for the Convertible Preferred Stock and $471.40 in cash per share of Convertible Preferred Stock. As a result of the cash redemption features included in the Convertible Preferred Stock conversion option, with such conversion not solely within our control, the instruments are classified as Redeemable preferred stock in temporary equity on the Condensed Consolidated Balance Sheet.

Dividends

Common Stock

In May 2019, our Board of Directors declared a cash dividend of $0.20 per share of common stock. The dividend is payable on or before August 30, 2019 to stockholders of record on August 15, 2019. 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 $20.3 million dividend declared during the second quarter 2019 was recorded as a reduction of retained earnings and is included as a payable in “Accrued liabilities — Other” on the Condensed Consolidated Balance Sheet. Nonforfeitable dividends paid on stock awards that subsequently forfeit are reclassified out of retained earnings or additional paid-in capital, as applicable, to stock compensation expense in the period in which the 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 2019, our Board of Directors declared a cash dividend of $20.31 per share of Convertible Preferred Stock. The dividend was paid in July to stockholders of record on July 1, 2019. The $1.3 million dividend declared during the second quarter 2019 was recorded as a reduction of retained earnings and is included as a payable in “Accrued liabilities — Other” on the Condensed Consolidated Balance Sheet.

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STOCK-BASED COMPENSATION

6 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

STOCK-BASED COMPENSATION

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)	2019			2018			2019			2018
Restricted stock awards:
Performance stock awards	$	5,535		$	3,809		$	10,929		$	10,538
Service-based stock awards	5,993			4,247			13,224			9,319
	11,528			8,056			24,153			19,857
Stock option awards	396			637			1,018			1,254
Total stock compensation cost	11,924			8,693			25,171			21,111
Less amounts capitalized to oil and gas properties	(5,430		)	(5,598		)	(11,964		)	(11,286		)
Stock compensation expense	$	6,494		$	3,095		$	13,207		$	9,825

Periodic stock 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. The increase in total stock compensation cost in the 2019 periods as compared to the 2018 periods is primarily due to awards granted either during or subsequent to the 2018 periods and performance stock award forfeitures that occurred during the second quarter of 2018, both of which were partially offset by awards vesting prior to or during the 2019 periods. Our accounting policy is to account for forfeitures in compensation cost when they occur.

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ASSET RETIREMENT OBLIGATIONS

6 Months Ended

Jun. 30, 2019

Asset Retirement Obligation [Abstract]

ASSET RETIREMENT OBLIGATIONS

ASSET RETIREMENT OBLIGATIONS

We recognize the present value of the fair value of liabilities for retirement obligations associated with tangible long-lived assets in the period in which there is a legal obligation associated with the retirement of such assets and the amount can be reasonably estimated. The associated asset retirement costs are capitalized as part of the carrying amount of the long-lived asset. This liability includes costs related to the plugging and abandonment of wells, the removal of facilities and equipment, and site restorations. Subsequent to initial measurement, the asset retirement liability is accreted each period. If there is a change in the estimated cost or timing of retirement, a revision is recorded to both the asset retirement obligation and the asset retirement capitalized cost. Capitalized costs are included as a component of the depreciation and depletion calculations.

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, 2019:

(in thousands)	Six Months Ended June 30, 2019
Asset retirement obligation at January 1, 2019	$	166,904
Liabilities incurred	12,611
Liability settlements and disposals	(11,771		)
Accretion expense	3,714
Revisions of estimated liabilities	2,415
Asset retirement obligation at June 30, 2019	173,873
Less current obligation	(16,492		)
Long-term asset retirement obligation	$	157,381

For the six months ended June 30, 2019, liabilities incurred included $9.4 million for the Resolute acquisition.

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EARNINGS PER SHARE

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

EARNINGS PER SHARE

EARNINGS PER SHARE

The calculations of basic and diluted net earnings per common share under the two-class method are presented below for the periods indicated:

	Three Months Ended June 30,
	2019						2018
(in thousands, except per share information)	Income (Numerator)			Shares (Denominator)	Per-Share Amount		Income (Numerator)			Shares (Denominator)	Per-Share Amount
Net income	$	109,309					$	140,997
Less: net income attributable to participating securities	(1,596		)				(1,892		)
Less: preferred stock dividends	(1,270		)				—
Basic earnings per share
Income available to common stockholders	106,443			99,658	$	1.07	139,105			93,728	$	1.48
Effects of dilutive securities (1)
Options	—			7			—			31
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	106,443		99,665	$	1.07	$	139,105		93,759	$	1.48

________________________________________

(1) Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings per share. Excluded from the three months ended June 30, 2019 calculation were 387.5 thousand potential common shares from the assumed exercise of employee stock options and 502.6 thousand potential common shares from the assumed conversion of the Convertible Preferred Stock. Excluded from the three months ended June 30, 2018 calculation were 292.1 thousand potential common shares from the assumed exercise of employee stock options.

	Six Months Ended June 30,
	2019						2018
(in thousands, except per share information)	Income (Numerator)			Shares (Denominator)	Per-Share Amount		Income (Numerator)			Shares (Denominator)	Per-Share Amount
Net income	$	135,625					$	327,315
Less: net income attributable to participating securities	(2,067		)				(4,546		)
Less: preferred stock dividends	(2,539		)				—
Basic earnings per share
Income available to common stockholders	131,019			97,800	$	1.34	322,769			93,713	$	3.44
Effects of dilutive securities (1)
Options	—			9			1			35
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	131,019		97,809	$	1.34	$	322,770		93,748	$	3.44

________________________________________

(1)

Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings per share. Excluded from the six months ended June 30, 2019 calculation were 391.1 thousand potential common shares from the assumed exercise of employee stock options and 502.6 thousand potential common shares from the assumed conversion of the Convertible Preferred Stock. Excluded from the six months ended June 30, 2018 calculation were 295.6 thousand potential common shares from the assumed exercise of employee stock options.

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INCOME TAXES

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

INCOME TAXES

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)	2019			2018			2019			2018
Current tax (benefit)	$	—		$	(717	)	$	—		$	(717	)
Deferred tax expense	34,046			42,783			42,119			99,732
	$	34,046		$	42,066		$	42,119		$	99,015
Combined federal and state effective income tax rate	23.7		%	23.0		%	23.7		%	23.2		%

At December 31, 2018, we had a U.S. net tax operating loss carryforward of approximately $1.16 billion, which will expire in tax years 2032 through 2037. We believe that the carryforward will be utilized before it expires. We also had enhanced oil recovery and marginal well credits of $3.5 million at December 31, 2018.

On March 1, 2019, the Company completed its acquisition of Resolute. For federal income tax purposes, the acquisition was a tax-free merger whereby the Company acquired carryover tax basis in Resolute’s assets and liabilities. As of March 1, 2019, the Company recorded a net deferred tax liability of $62.4 million associated with the acquired assets. The net deferred tax liability includes certain deferred tax assets net of valuation allowances. The acquired tax attributes include federal net operating loss, capital loss, and enhanced oil recovery tax credit carryforwards. The carryforwards are subject to an annual limitation under Internal Revenue Code Section 382.

At June 30, 2019, 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 2016 through 2018 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 2015 through 2018.

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 and non-deductible expenses.

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COMMITMENTS AND CONTINGENCIES

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES

Lease Commitments

Effective January 1, 2019, we began accounting for leases in accordance with Topic 842, which requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for periods of greater than 12 months. Prior to January 1, 2019, we accounted for leases in accordance with ASC Topic 840, Leases, under which operating leases were not recorded on the balance sheet.

Real Estate Leases

We have operating leases for office space in various locations that provide us the right to control the use of the specified office space over the term of the contract. These leases require us to make monthly “base rent” payments, as well as “additional payments” for our share of operating expenses and taxes incurred by the landlord. At our option, the terms of these leases can be renewed for varying periods, and in some cases may be terminated early at our option. As of June 30, 2019, these leases had remaining lease terms ranging from 4.9 to 7.2 years. These leases do not contain residual value guarantees, options to purchase the underlying office space, or terms or covenants that impose restrictions on our ability to pay dividends, incur debt, or enter into additional leases. We have no subleases of office space.

Lease liabilities associated with our real estate leases were recorded at the present value of the future lease payments, after considering the following:

• “Base rent” payments are considered fixed lease payments, while “additional payments” are considered variable lease payments.

• At commencement of each real estate lease we were not reasonably certain to exercise the option to renew or terminate such lease.

• The discount rate used to calculate each lease liability was based on our incremental borrowing rate, which was estimated utilizing trading metrics for our senior unsecured notes as adjusted using relevant market factors to develop a synthetic secured yield curve.

• As an accounting policy we have elected not to separate nonlease components from lease components for our real estate class of assets.

• Where applicable, we determined that the effect of accounting for the right to use land separately from other lease components would be insignificant.

Production-Related Leases

We have operating leases for equipment used in connection with our oil and gas production operations, including well-head compressors, pipeline compressors, and artificial lift mechanisms. These leases provide us the right to control the use of explicitly or implicitly identified equipment during the term of the contract. These leases often include an “evergreen” provision that allows the contract term to continue on a month-to-month basis following expiration of the initial term stated in the contract. As of June 30, 2019, these leases had remaining lease terms ranging from one month to 11.3 years. These leases require us to make monthly payments of fixed amounts, which cover the

cost of renting the equipment and, in some cases, the cost of maintaining the leased equipment. These leases do not typically require us to make variable lease payments. These leases do not contain residual value guarantees, options to purchase the underlying equipment, or terms or covenants that impose restrictions on our ability to pay dividends, incur debt, or enter into additional leases. We have no subleases of production-related equipment.

Lease liabilities associated with our production-related operating leases were recorded at the present value of the future lease payments, after considering the following:

• For leases with an evergreen provision, the term of the lease was determined to be the noncancellable period in the contract plus the period beyond the noncancellable period that we believe it is reasonably certain we will need the equipment for operational purposes, limited to the point in time at which both we and the lessor each have the right to terminate the lease without permission from the other party with no more than an insignificant penalty.

• The discount rate used to calculate each lease liability was based on our incremental borrowing rate, which was estimated utilizing trading metrics for our senior unsecured notes as adjusted using relevant market factors to develop a synthetic secured yield curve.

• As an accounting policy we have elected not to separate nonlease components from lease components for our production-related class of assets.

We have one finance lease, which results from a gathering agreement (the “Gathering Agreement”) on a gathering system. Under terms of the Gathering Agreement, we have the option to acquire a portion of the underlying gathering system upon termination of the Gathering Agreement. We make monthly payments under the Gathering Agreement based on the volume of oil gathered and a gathering rate per barrel, which is adjusted periodically. As of June 30, 2019, this lease had a remaining term of 6.2 years.

Exploration and Development-Related Leases

We have operating leases for equipment used in connection with our exploration and development activities, including drilling rigs, pressure pumping equipment, directional drilling tools, well-control devices, and various pieces of support equipment. These leases provide us the right to control the use of explicitly or implicitly identified equipment during the term of the contract. As of June 30, 2019, these leases had remaining lease terms of 12 months or less. These leases typically require us to make payments in amounts based on the usage of the underlying equipment. These leases do not contain residual value guarantees, options to purchase the underlying equipment, or terms or covenants that impose restrictions on our ability to pay dividends, incur debt, or enter into additional leases. We have no subleases of exploration and development-related equipment.

As an accounting policy we have elected not to apply the recognition requirements of Topic 842 to our exploration and development-related class of assets with lease terms at commencement of 12 months or less. As such, we have not recorded any lease liabilities associated with our exploration and development-related leases. In addition, as an accounting policy we have elected not to separate nonlease components from lease components for our exploration and development-related class of assets.

Balance Sheet Presentation

The following tables present the amounts and classifications of our right-of-use assets and estimated lease liabilities as of June 30, 2019:

(in thousands)	Balance Sheet Location	June 30, 2019
Operating lease right-of-use assets	Non-current assets — Fixed assets, net	$	243,089
Finance lease right-of-use asset	Non-current assets — Other assets	27,042
Total right-of-use assets		$	270,131

(in thousands)	Balance Sheet Location	June 30, 2019
Operating lease liabilities — current	Current liabilities — Operating leases	$	62,119
Operating lease liabilities — non-current	Non-current liabilities — Operating leases	191,413
Finance lease liability — current	Current liabilities — Accrued liabilities-Other	6,576
Finance lease liability — non-current	Non-current liabilities — Other liabilities	21,895
Total lease liabilities		$	282,003

Lease Cost and Cash Flows

The following table summarizes estimated total lease cost, which includes amounts recognized in income and amounts capitalized for the indicated period:

(in thousands)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease cost:
Amortization of right-of-use asset	$	1,097	$	2,193
Interest on lease liability	457		943
Operating lease cost: (1)
Production expense	3,943		7,777
Gas gathering and other expense	6,522		12,686
General and administrative expense	2,335		4,634
Short-term lease cost (2)	162,334		317,044
Total lease cost	$	176,688	$	345,277

________________________________________

(1) Operating lease cost in the table above is composed of costs incurred under real estate and production-related leases. These costs are included in the indicated captions on the Condensed Consolidated Statements of Operations.

(2) Short-term lease cost in the table above is composed of costs incurred under leases with terms of 12 months or less for right-of-use assets used in exploration and development activities. Payments under such leases are typically based on usage of the underlying right-of-use asset and, therefore, are also variable lease payments. These costs are capitalized as part of proved properties on the Condensed Consolidated Balance Sheet.

The following table summarizes estimated cash paid for our leases for the indicated period:

(in thousands)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance lease	$	1,555
Operating cash outflows from operating leases	$	25,466
Cash paid for short-term leases and variable lease payments:
Investing cash outflows from operating leases	$	309,150

During the six months ended June 30, 2019, we recognized $49.1 million in right-of-use assets in connection with new operating leases entered into during the period.

Lease Liability Maturity Analysis

The following table presents the weighted-average remaining lease terms and discount rates of our leases as of the indicated date:

	June 30, 2019
Weighted-average remaining lease term (in years):
Finance lease	6.2
Operating leases	4.5
Weighted-average discount rate:
Finance lease	6.5	%
Operating leases	4.0	%

The following table reflects the undiscounted future cash flows utilized in the calculation of the lease liabilities recorded at June 30, 2019:

	June 30, 2019
(in thousands)	Operating Leases			Finance Lease
July 1, 2019 — June 30, 2020	$	72,320		$	6,802
July 1, 2020 — June 30, 2021	64,198			5,846
July 1, 2021 — June 30, 2022	58,280			5,562
July 1, 2022 — June 30, 2023	45,166			5,279
July 1, 2023 — June 30, 2024	21,977			4,995
Remaining periods	18,814			5,469
Total undiscounted future cash flows	280,755			33,953
Less effects of discounting	(27,223		)	(5,482		)
Lease liabilities recognized	$	253,532		$	28,471

As of December 31, 2018 the following future minimum cash payments were required under leases for office space:

(in thousands)	December 31, 2018
2019	$	9,849
2020	10,790
2021	11,000
2022	11,130
2023	11,433
Remaining periods	20,831
Total future minimum lease payments	$	75,033

In addition, as of December 31, 2018, we had various contractual commitments for compressor equipment under operating lease arrangements totaling $34.8 million with lease terms expiring over 1 - 35 months.

Other Commitments

At June 30, 2019, we had estimated commitments of approximately: (i) $304.6 million to finish drilling, completing, or performing other work on wells and various other infrastructure projects in progress and (ii) $19.2 million to finish gathering system construction in progress.

At June 30, 2019, we had firm sales contracts to deliver approximately 290.7 Bcf of gas over the next 5.6 years. If we do not deliver this gas, our estimated financial commitment, calculated using the July 2019 index price, would be approximately $303.3 million. The value of this commitment will fluctuate due to price volatility and actual volumes delivered. However, we believe no financial commitment will be due based on our current proved reserves and production levels from which we can fulfill these volumetric obligations.

In connection with gas gathering and processing agreements, we have volume commitments over the next 9.5 years. If we do not deliver the committed gas or NGLs, as the case may be, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2019, would be approximately $655.2 million. However, we believe no financial commitment will be due based on our current proved reserves and production levels from which we can fulfill these volumetric obligations.

We have minimum volume delivery commitments associated with agreements to reimburse connection costs to various pipelines. If we do not deliver this gas, the estimated maximum amount that would be payable under these commitments, calculated as of June 30, 2019, would be approximately $153.3 million. Of this total, we have accrued a liability of $4.6 million, representing the estimated amount we will have to pay due to insufficient forecasted volumes at particular connection points.

At June 30, 2019, we have various firm transportation agreements for gas and oil pipeline capacity with end dates ranging from 2020 - 2028 under which we will have to pay an estimated $70.5 million over the remaining terms of the agreements. These agreements were entered into to support our residue gas and oil marketing efforts, and we believe we have sufficient reserves that will utilize this firm transportation.

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

Litigation

We have various litigation matters related to the ordinary course of our business. We assess the probability of estimable amounts related to these matters in accordance with guidance established by the FASB and adjust our

accruals accordingly. 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 after consideration of current accruals.

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SUPPLEMENTAL CASH FLOW INFORMATION

6 Months Ended

Jun. 30, 2019

Supplemental Cash Flow Elements [Abstract]

SUPPLEMENTAL CASH FLOW INFORMATION

SUPPLEMENTAL CASH FLOW INFORMATION

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Cash paid during the period for:
Interest (net of capitalized amounts of $19,381, $9,233, $20,121 and $9,389, respectively) (1)	$	14,396	$	22,954	$	32,984	$	23,343
Income taxes	$	1,200	$	—	$	1,206	$	—
Cash received for income tax refunds	$	335	$	717	$	336	$	718

________________________________________

(1)

The six months ended June 30, 2019 includes $17.6 million in interest paid upon the redemption of Resolute’s senior notes and credit facility on March 1, 2019.

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RELATED PARTY TRANSACTIONS

6 Months Ended

Jun. 30, 2019

Related Party Transactions [Abstract]

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS

Helmerich & Payne, Inc. (“H&P”) provides contract drilling services to Cimarex. Cimarex incurred drilling costs of approximately $22.1 million and $46.6 million related to these services during the three and six months ended June 30, 2019 and $16.4 million and $40.0 million during the three and six months ended June 30, 2018. The amount incurred in 2019 is included in the short-term lease costs disclosed in Note 10. Hans Helmerich, a director of Cimarex, is Chairman of the Board of Directors of H&P.

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ACQUISITIONS

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

ACQUISITIONS

ACQUISITIONS

On March 1, 2019, we completed the acquisition of Resolute Energy Corporation, an independent oil and gas company focused on the acquisition and development of unconventional oil and gas properties in the Delaware Basin area of the Permian Basin of west Texas. The principal factors considered by management in making this acquisition included: (i) our expectation that the acquired assets’ attractive returns are competitive with those in our existing portfolio, (ii) the opportunity to apply our experience and learnings from already operating in this area to generating productivity gains from the acquired properties, (iii) the ability to increase our acreage position in the Delaware Basin, and (iv) the expectation that the acquisition will be financially accretive.

We acquired 100% of the outstanding common shares and voting interests of Resolute in a cash and stock transaction. The acquisition date fair value of the consideration transferred totaled $820.3 million, which consisted of cash, common stock, and a newly created series of preferred stock (see Note 5 for more information on the preferred stock) as follows:

(in thousands)	Fair Value of Consideration Transferred
Cash	$	325,677
Common stock (5,652 shares issued)	413,015
Preferred stock (63 shares issued)	81,620
	$	820,312

The fair value of the common stock issued as part of the consideration was determined on the basis of the closing market price of Cimarex common stock on the acquisition date. The fair value of the preferred stock issued as part of the consideration was determined using a multiple probability simulation model.

Preliminary Purchase Price Allocation

The Resolute acquisition has been accounted for as a business combination, using the acquisition method. The following table represents the preliminary allocation of the Resolute purchase price to the identifiable assets acquired and liabilities assumed based on the fair values at the acquisition date, with any excess of the purchase price over the estimated fair value of the identifiable net assets acquired recorded to goodwill. Certain data necessary to complete the purchase price allocation is not yet available, and includes, but is not limited to, finalization of the fair value of certain assets and liabilities, including pre-acquisition working capital balances and completion of the final Resolute tax returns that will provide the underlying tax basis of Resolute’s assets and liabilities and net operating losses. We expect to complete the purchase price allocation during the 12-month period following the acquisition date, during which time the value of the assets and liabilities may be revised as appropriate.

The following table sets forth the preliminary purchase price allocation:

(in thousands)	March 1, 2019
Cash	$	41,236
Accounts receivable	50,739
Other current assets	13,280
Proved oil and gas properties	692,600
Unproved oil and gas properties	1,054,200
Fixed assets	5,355
Goodwill	107,341
Other assets	142
Current liabilities	(202,735		)
Long-term debt	(870,000		)
Deferred income taxes	(62,409		)
Asset retirement obligation	(9,437		)
Total identifiable net assets	$	820,312

In connection with the acquisition, we assumed, and immediately repaid, $870.0 million principal amount of long-term debt consisting of $600.0 million of senior notes and $270.0 million of credit facility borrowings. On March 1, 2019, we repaid Resolute’s credit facility borrowings, delivered a notice of optional redemption of Resolute’s senior notes for an April 1, 2019 redemption date, and irrevocably deposited with a trustee the full amount of funds to repay the aggregate outstanding senior notes principal balance plus accrued and unpaid interest, incurring a $4.3 million loss on early extinguishment of debt. The cash consideration transferred and the repayment of Resolute’s long-term debt was funded using cash on hand and borrowings on our Credit Facility. We subsequently repaid the borrowings on our Credit Facility using the net proceeds from the March 8, 2019 issuance of $500 million aggregate principal amount of 4.375% senior unsecured notes (see Note 2 for more information on our debt issuance).

Goodwill of $107.3 million has been recognized principally as a result of recording net deferred tax liabilities arising from the difference between the tax basis and the purchase price allocated to Resolute’s assets and liabilities, and anticipated opportunities for cost savings through administrative and operational synergies. Goodwill is not expected to be deductible for tax purposes.

Acquisition-related costs incurred in 2019 were $8.4 million. These costs, which are comprised primarily of advisory, legal, and other professional and consulting fees, are included in the Other operating expense, net line item on our Condensed Consolidated Statements of Operations and Comprehensive Income.

The results of Resolute’s operations have been included in our consolidated financial statements since the March 1, 2019 acquisition date. The amount of revenue and direct operating expenses resulting from the acquisition included in our Condensed Consolidated Statements of Operations and Comprehensive Income from March 1, 2019 through June 30, 2019 is $100.0 million and $21.9 million, respectively.

Pro Forma Financial Information

The following supplemental pro forma information for the three and six month periods ended June 30, 2019 and 2018 has been prepared to give effect to the Resolute acquisition as if it had occurred on January 1, 2018. The information below reflects pro forma adjustments based on available information and certain assumptions that we believe are reasonable, including (i) the depletion of the combined company’s proved oil and gas properties, (ii) the capitalization of interest expense, and (iii) the estimated tax impacts of the pro forma adjustments. Additionally, pro forma earnings were adjusted to exclude acquisition-related costs incurred by Cimarex of $8.4 million and transaction-related costs incurred by Resolute of $60.0 million. The pro forma results of operations do not include any cost savings or other synergies that may result from the acquisition or any estimated costs that have been or will be incurred by Cimarex to integrate the Resolute assets. The pro forma financial data has not been adjusted to reflect any other acquisitions or dispositions made during the periods presented as their results were not deemed material.

The pro forma information is not necessarily indicative of the results that might have occurred had the transaction actually taken place on January 1, 2018 and is not intended to be a projection of future results. Future results may vary significantly from the results reflected in the following pro forma information because of normal production declines, changes in commodity prices, future acquisitions and divestitures, future development and exploration activities, and other factors.

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Revenue	$	546,463	$	625,332	$	1,176,556	$	1,263,410
Net income	$	109,365	$	148,486	$	121,909	$	335,544
Net income per share:
Basic	$	1.07	$	1.48	$	1.18	$	3.33
Diluted	$	1.07	$	1.47	$	1.18	$	3.33

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BASIS OF PRESENTATION (Policies)

6 Months Ended

Jun. 30, 2019

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation

BASIS OF PRESENTATION

Cimarex Energy Co. (“Cimarex,” “we,” or “us”), a Delaware corporation, is an independent oil and gas exploration and production company. Our operations are mainly located in Texas, Oklahoma, and New Mexico. 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, 2018.

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 2019 financial statement presentation.

Use of Estimates

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, the estimation of future abandonment obligations used in recording asset retirement obligations, and the assessment of goodwill. Estimates and judgments also are required in determining allowances for doubtful accounts, impairments of unproved properties and other assets, valuation of deferred tax assets, fair value measurements, and contingencies.

Oil and Gas Well Equipment and Supplies and Oil and Gas Properties

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 estimated selling prices in the ordinary course of business, less reasonably predictable costs of 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. The calculated ceiling limitation is not intended to be indicative of the fair market value of our proved reserves or future results.

We did not recognize a ceiling test impairment during the three and six months ended June 30, 2019 and 2018 because the net capitalized cost of our oil and gas properties, as adjusted for income taxes, did not exceed the ceiling limitation. However, at June 30, 2019, a decline in the value of our ceiling limitation of approximately 4% or more would have resulted in an impairment. If pricing conditions deteriorate, including the further widening of local market basis differentials, or if there is a negative impact on one or more of the other components of the calculation, we may incur full cost ceiling test impairments in future quarters. 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.

Revenue Recognition

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, 2019, 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.

Our gas and NGLs are sold under a limited number of contract structure types common in our industry. Under these contracts the gas and its components, including NGLs, may be sold to a single purchaser or the residue gas and NGLs may be sold to separate purchasers. Regardless of the contract structure type, the terms of these contracts compensate us for the value of the residue gas and NGLs at current market prices for each product. However, depending on the contract structure type, certain transportation, processing, and other charges may be deducted against the prices received for the product. Our oil typically is sold at specific delivery points under contract terms that also are common in our industry.

Gas Gathering

When we transport and/or process 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 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 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.

Lease Accounting

Lease Accounting

In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-02, Leases (“Topic 842”).  The FASB subsequently issued various ASUs which provided additional implementation guidance. Topic 842 requires lessees to recognize lease liabilities and right-of-use assets on the balance sheet for contracts that provide lessees with the right to control the use of identified assets for a period of time. The scope of Topic 842 excludes leases to explore for or use minerals, oil, natural gas, and similar nonregenerative resources. We adopted Topic 842 effective January 1, 2019, using the modified retrospective method applied to all leases that existed on that date, which resulted in the recognition of lease liabilities of $276.9 million and right-of-use assets of $265.0 million. In connection with adoption we made use of the following practical expedients, which are provided in Topic 842:

• a package of practical expedients to not reassess: 1) whether expired or existing contracts are or contain a lease, 2) lease classification for expired or existing leases, and 3) initial direct costs for existing leases;

• an election not to apply the recognition requirements in Topic 842 to short-term leases (a lease that at commencement date has a lease term of 12 months or less and does not contain a purchase option that the Company is reasonably certain to exercise);

• a practical expedient that permits combining lease and nonlease components in a contract and accounting for the combination as a lease (elected by asset class); and

•

a practical expedient to not reassess certain land easements in existence prior to January 1, 2019.

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LONG-TERM DEBT (Tables)

6 Months Ended

Jun. 30, 2019

Long-term Debt, Unclassified [Abstract]

Schedule of Long-Term Debt

Long-term debt at June 30, 2019 and December 31, 2018 consisted of the following:

	June 30, 2019							December 31, 2018
(in thousands)	Principal		Unamortized Debt Issuance Costs and Discounts (1)			Long-term Debt, net		Principal		Unamortized Debt Issuance Costs and Discount (1)			Long-term Debt, net
4.375% Notes due 2024	$	750,000	$	(3,982	)	$	746,018	$	750,000	$	(4,439	)	$	745,561
3.90% Notes due 2027	750,000		(6,651		)	743,349		750,000		(7,007		)	742,993
4.375% Notes due 2029	500,000		(5,137		)	494,863		—		—			—
	$	2,000,000	$	(15,770	)	$	1,984,230	$	1,500,000	$	(11,446	)	$	1,488,554

________________________________________

(1)

At June 30, 2019, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.1 million and $1.5 million, respectively. At December 31, 2018, the unamortized debt issuance costs and discount related to the 3.90% Notes due 2027 were $5.4 million and $1.6 million, respectively. At June 30, 2019, the unamortized debt issuance costs and discount related to the 4.375% Notes due 2029 were $4.5 million and $0.7 million, respectively. The 4.375% Notes due 2024 were issued at par.

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DERIVATIVE INSTRUMENTS (Tables)

6 Months Ended

Jun. 30, 2019

Derivative Instruments and Hedges, Assets [Abstract]

Schedule of Outstanding Hedging Contracts Relative to Future Production

The following tables summarize our outstanding derivative contracts as of June 30, 2019:

Oil Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		3,312,000		2,576,000		5,888,000
Weighted Avg Price - Floor	$	—	$	—	$	54.28	$	55.50	$	54.81
Weighted Avg Price - Ceiling	$	—	$	—	$	67.88	$	68.36	$	68.09
2020:
WTI (1)
Volume (Bbls)	1,820,000		1,092,000		368,000		368,000		3,648,000
Weighted Avg Price - Floor	$	54.90	$	51.50	$	50.00	$	50.00	$	52.89
Weighted Avg Price - Ceiling	$	68.49	$	63.59	$	62.15	$	62.15	$	65.74

________________________________________

(1) The index price for these collars is West Texas Intermediate (“WTI”) as quoted on the New York Mercantile Exchange (“NYMEX”).

Gas Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
PEPL (1)
Volume (MMBtu)	—		—		12,880,000		10,120,000		23,000,000
Weighted Avg Price - Floor	$	—	$	—	$	1.93	$	1.92	$	1.92
Weighted Avg Price - Ceiling	$	—	$	—	$	2.32	$	2.36	$	2.33
Perm EP (2)
Volume (MMBtu)	—		—		8,280,000		5,520,000		13,800,000
Weighted Avg Price - Floor	$	—	$	—	$	1.46	$	1.38	$	1.43
Weighted Avg Price - Ceiling	$	—	$	—	$	1.76	$	1.71	$	1.74
Waha (3)
Volume (MMBtu)	—		—		5,520,000		5,520,000		11,040,000
Weighted Avg Price - Floor	$	—	$	—	$	1.48	$	1.48	$	1.48
Weighted Avg Price - Ceiling	$	—	$	—	$	1.82	$	1.82	$	1.82
2020:
PEPL (1)
Volume (MMBtu)	7,280,000		4,550,000		1,840,000		1,840,000		15,510,000
Weighted Avg Price - Floor	$	1.93	$	1.91	$	1.85	$	1.85	$	1.91
Weighted Avg Price - Ceiling	$	2.36	$	2.28	$	2.31	$	2.31	$	2.32
Perm EP (2)
Volume (MMBtu)	3,640,000		2,730,000		1,840,000		1,840,000		10,050,000
Weighted Avg Price - Floor	$	1.40	$	1.40	$	1.35	$	1.35	$	1.38
Weighted Avg Price - Ceiling	$	1.79	$	1.82	$	1.66	$	1.66	$	1.75
Waha (3)
Volume (MMBtu)	4,550,000		2,730,000		—		—		7,280,000
Weighted Avg Price - Floor	$	1.50	$	1.57	$	—	$	—	$	1.53
Weighted Avg Price - Ceiling	$	1.87	$	1.97	$	—	$	—	$	1.91

________________________________________

(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.

Oil Basis Swaps	First Quarter		Second Quarter		Third Quarter			Fourth Quarter			Total
2019:
WTI Midland (1)
Volume (Bbls)	—		—		3,266,000			3,266,000			6,532,000
Weighted Avg Differential (2)	$	—	$	—	$	(7.36	)	$	(6.32	)	$	(6.84	)
2020:
WTI Midland (1)
Volume (Bbls)	2,093,000		1,365,000		736,000			736,000			4,930,000
Weighted Avg Differential (2)	$	0.16	$	0.19	$	0.71		$	0.71		$	0.33

________________________________________

(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 Swaps	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		460,000		460,000		920,000
Weighted Avg Price	$	—	$	—	$	64.54	$	64.54	$	64.54

________________________________________

(1) The fixed price on these swaps is NYMEX WTI.

Gas Swaps	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
Henry Hub (1)
Volume (MMBtu)	—		—		3,220,000		3,220,000		6,440,000
Weighted Avg Price	$	—	$	—	$	3.00	$	3.00	$	3.00

________________________________________

(1) The fixed price on these swaps is NYMEX Henry Hub.

Sold Oil Calls	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI (1)
Volume (Bbls)	—		—		337,640		337,640		675,280
Weighted Avg Call Price	$	—	$	—	$	64.36	$	64.36	$	64.36

________________________________________

(1)

The index on these sold calls is NYMEX WTI.

Schedule of Derivative Contracts Entered into Subsequent to Balance Sheet Date

The following table summarizes our derivative contracts entered into subsequent to June 30, 2019 through August 1, 2019:

Oil Collars	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Total
2019:
WTI
Volume (Bbls)	—		—		368,000		368,000		736,000
Wtd Avg Price - Floor	$	—	$	—	$	50.00	$	50.00	$	50.00
Wtd Avg Price - Ceiling	$	—	$	—	$	63.45	$	63.45	$	63.45
2020:
WTI
Volume (Bbls)	364,000		364,000		368,000		368,000		1,464,000
Wtd Avg Price - Floor	$	50.00	$	50.00	$	50.00	$	50.00	$	50.00
Wtd Avg Price - Ceiling	$	63.45	$	63.45	$	63.45	$	63.45	$	63.45

Schedule of Net (Gains) Losses from Settlements and Changes of Derivative Contracts

The following table presents the components of (Gain) loss on derivative instruments, net for the periods indicated.

	Three Months Ended June 30,						Six Months Ended June 30,
(in thousands)	2019			2018			2019			2018
(Increase) decrease in fair value of derivative instruments, net:
Gas contracts	$	(6,370	)	$	14,566		$	(16,216	)	$	2,777
Oil contracts	(28,161		)	(397		)	88,086			(5,156		)
	(34,531		)	14,169			71,870			(2,379		)
Cash (receipts) payments on derivative instruments, net:
Gas contracts	(21,176		)	(9,918		)	(17,412		)	(15,037		)
Oil contracts	14,939			17,448			20,226			34,956
	(6,237		)	7,530			2,814			19,919
(Gain) loss on derivative instruments, net	$	(40,768	)	$	21,699		$	74,684		$	17,540

Schedule of Derivative Assets and Liabilities

The following tables present the amounts and classifications of our derivative assets and liabilities as of June 30, 2019 and December 31, 2018, as well as the potential effect of netting arrangements on our recognized derivative asset and liability amounts.

		June 30, 2019
(in thousands)	Balance Sheet Location	Asset			Liability
Oil contracts	Current assets — Derivative instruments	$	23,060		$	—
Gas contracts	Current assets — Derivative instruments	19,897			—
Oil contracts	Non-current assets — Derivative instruments	613			—
Oil contracts	Current liabilities — Derivative instruments	—			50,056
Oil contracts	Non-current liabilities — Derivative instruments	—			171
Gas contracts	Non-current liabilities — Derivative instruments	—			669
Total gross amounts presented in the balance sheet		43,570			50,896
Less: gross amounts not offset in the balance sheet		(23,966		)	(23,966		)
Net amount		$	19,604		$	26,930
		December 31, 2018
(in thousands)	Balance Sheet Location	Asset			Liability
Oil contracts	Current assets — Derivative instruments	$	94,240		$	—
Gas contracts	Current assets — Derivative instruments	7,699			—
Oil contracts	Non-current assets — Derivative instruments	9,246			—
Oil contracts	Current liabilities — Derivative instruments	—			23,378
Gas contracts	Current liabilities — Derivative instruments	—			4,249
Oil contracts	Non-current liabilities — Derivative instruments	—			311
Gas contracts	Non-current liabilities — Derivative instruments	—			1,956
Total gross amounts presented in the balance sheet		111,185			29,894
Less: gross amounts not offset in the balance sheet		(29,894		)	(29,894		)
Net amount		$	81,291		$	—

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FAIR VALUE MEASUREMENTS (Tables)

6 Months Ended

Jun. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Fair Value Measurement Information for Certain Assets and Liabilities

The following table provides fair value measurement information for certain assets and liabilities as of June 30, 2019 and December 31, 2018:

	June 30, 2019						December 31, 2018
(in thousands)	Book Value			Fair Value			Book Value			Fair Value
Financial Assets (Liabilities):
4.375% Notes due 2024	$	(750,000	)	$	(793,913	)	$	(750,000	)	$	(744,578	)
3.90% Notes due 2027	$	(750,000	)	$	(769,643	)	$	(750,000	)	$	(701,273	)
4.375% Notes due 2029	$	(500,000	)	$	(530,535	)	$	—		$	—
Derivative instruments — assets	$	43,570		$	43,570		$	111,185		$	111,185
Derivative instruments — liabilities	$	(50,896	)	$	(50,896	)	$	(29,894	)	$	(29,894	)

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STOCK-BASED COMPENSATION (Tables)

6 Months Ended

Jun. 30, 2019

Retirement Benefits [Abstract]

Schedule of Recognition of Non-Cash Stock-Based Compensation Costs

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)	2019			2018			2019			2018
Restricted stock awards:
Performance stock awards	$	5,535		$	3,809		$	10,929		$	10,538
Service-based stock awards	5,993			4,247			13,224			9,319
	11,528			8,056			24,153			19,857
Stock option awards	396			637			1,018			1,254
Total stock compensation cost	11,924			8,693			25,171			21,111
Less amounts capitalized to oil and gas properties	(5,430		)	(5,598		)	(11,964		)	(11,286		)
Stock compensation expense	$	6,494		$	3,095		$	13,207		$	9,825

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ASSET RETIREMENT OBLIGATIONS (Tables)

6 Months Ended

Jun. 30, 2019

Asset Retirement Obligation [Abstract]

Schedule of 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, 2019:

(in thousands)	Six Months Ended June 30, 2019
Asset retirement obligation at January 1, 2019	$	166,904
Liabilities incurred	12,611
Liability settlements and disposals	(11,771		)
Accretion expense	3,714
Revisions of estimated liabilities	2,415
Asset retirement obligation at June 30, 2019	173,873
Less current obligation	(16,492		)
Long-term asset retirement obligation	$	157,381

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EARNINGS PER SHARE (Tables)

6 Months Ended

Jun. 30, 2019

Earnings Per Share [Abstract]

Schedule of Calculations of Basic and Diluted Net Earnings (Loss) per Common Share

The calculations of basic and diluted net earnings per common share under the two-class method are presented below for the periods indicated:

	Three Months Ended June 30,
	2019						2018
(in thousands, except per share information)	Income (Numerator)			Shares (Denominator)	Per-Share Amount		Income (Numerator)			Shares (Denominator)	Per-Share Amount
Net income	$	109,309					$	140,997
Less: net income attributable to participating securities	(1,596		)				(1,892		)
Less: preferred stock dividends	(1,270		)				—
Basic earnings per share
Income available to common stockholders	106,443			99,658	$	1.07	139,105			93,728	$	1.48
Effects of dilutive securities (1)
Options	—			7			—			31
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	106,443		99,665	$	1.07	$	139,105		93,759	$	1.48

________________________________________

(1) Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings per share. Excluded from the three months ended June 30, 2019 calculation were 387.5 thousand potential common shares from the assumed exercise of employee stock options and 502.6 thousand potential common shares from the assumed conversion of the Convertible Preferred Stock. Excluded from the three months ended June 30, 2018 calculation were 292.1 thousand potential common shares from the assumed exercise of employee stock options.

	Six Months Ended June 30,
	2019						2018
(in thousands, except per share information)	Income (Numerator)			Shares (Denominator)	Per-Share Amount		Income (Numerator)			Shares (Denominator)	Per-Share Amount
Net income	$	135,625					$	327,315
Less: net income attributable to participating securities	(2,067		)				(4,546		)
Less: preferred stock dividends	(2,539		)				—
Basic earnings per share
Income available to common stockholders	131,019			97,800	$	1.34	322,769			93,713	$	3.44
Effects of dilutive securities (1)
Options	—			9			1			35
Diluted earnings per share
Income available to common stockholders and assumed conversions	$	131,019		97,809	$	1.34	$	322,770		93,748	$	3.44

________________________________________

(1)

Inclusion of certain potential common shares would have an anti-dilutive effect, therefore, these shares were excluded from the calculations of diluted earnings per share. Excluded from the six months ended June 30, 2019 calculation were 391.1 thousand potential common shares from the assumed exercise of employee stock options and 502.6 thousand potential common shares from the assumed conversion of the Convertible Preferred Stock. Excluded from the six months ended June 30, 2018 calculation were 295.6 thousand potential common shares from the assumed exercise of employee stock options.

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INCOME TAXES (Tables)

6 Months Ended

Jun. 30, 2019

Income Tax Disclosure [Abstract]

Schedule of Components of the Provision for 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)	2019			2018			2019			2018
Current tax (benefit)	$	—		$	(717	)	$	—		$	(717	)
Deferred tax expense	34,046			42,783			42,119			99,732
	$	34,046		$	42,066		$	42,119		$	99,015
Combined federal and state effective income tax rate	23.7		%	23.0		%	23.7		%	23.2		%

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COMMITMENTS AND CONTINGENCIES (Tables)

6 Months Ended

Jun. 30, 2019

Commitments and Contingencies Disclosure [Abstract]

Schedule of Supplemental Balance Sheet Information of Leases

The following tables present the amounts and classifications of our right-of-use assets and estimated lease liabilities as of June 30, 2019:

(in thousands)	Balance Sheet Location	June 30, 2019
Operating lease right-of-use assets	Non-current assets — Fixed assets, net	$	243,089
Finance lease right-of-use asset	Non-current assets — Other assets	27,042
Total right-of-use assets		$	270,131

(in thousands)	Balance Sheet Location	June 30, 2019
Operating lease liabilities — current	Current liabilities — Operating leases	$	62,119
Operating lease liabilities — non-current	Non-current liabilities — Operating leases	191,413
Finance lease liability — current	Current liabilities — Accrued liabilities-Other	6,576
Finance lease liability — non-current	Non-current liabilities — Other liabilities	21,895
Total lease liabilities		$	282,003

Schedule of Lease Cost and Cash Paid for Leases

The following table summarizes estimated total lease cost, which includes amounts recognized in income and amounts capitalized for the indicated period:

(in thousands)	Three Months Ended June 30, 2019		Six Months Ended June 30, 2019
Finance lease cost:
Amortization of right-of-use asset	$	1,097	$	2,193
Interest on lease liability	457		943
Operating lease cost: (1)
Production expense	3,943		7,777
Gas gathering and other expense	6,522		12,686
General and administrative expense	2,335		4,634
Short-term lease cost (2)	162,334		317,044
Total lease cost	$	176,688	$	345,277

________________________________________

(1) Operating lease cost in the table above is composed of costs incurred under real estate and production-related leases. These costs are included in the indicated captions on the Condensed Consolidated Statements of Operations.

(2) Short-term lease cost in the table above is composed of costs incurred under leases with terms of 12 months or less for right-of-use assets used in exploration and development activities. Payments under such leases are typically based on usage of the underlying right-of-use asset and, therefore, are also variable lease payments. These costs are capitalized as part of proved properties on the Condensed Consolidated Balance Sheet.

The following table summarizes estimated cash paid for our leases for the indicated period:

(in thousands)	Six Months Ended June 30, 2019
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance lease	$	1,555
Operating cash outflows from operating leases	$	25,466
Cash paid for short-term leases and variable lease payments:
Investing cash outflows from operating leases	$	309,150

Schedule of Weighted-Average Remaining Lease Term and Discount Rates of Leases

The following table presents the weighted-average remaining lease terms and discount rates of our leases as of the indicated date:

	June 30, 2019
Weighted-average remaining lease term (in years):
Finance lease	6.2
Operating leases	4.5
Weighted-average discount rate:
Finance lease	6.5	%
Operating leases	4.0	%

Schedule of Maturity of Finance Leases

The following table reflects the undiscounted future cash flows utilized in the calculation of the lease liabilities recorded at June 30, 2019:

	June 30, 2019
(in thousands)	Operating Leases			Finance Lease
July 1, 2019 — June 30, 2020	$	72,320		$	6,802
July 1, 2020 — June 30, 2021	64,198			5,846
July 1, 2021 — June 30, 2022	58,280			5,562
July 1, 2022 — June 30, 2023	45,166			5,279
July 1, 2023 — June 30, 2024	21,977			4,995
Remaining periods	18,814			5,469
Total undiscounted future cash flows	280,755			33,953
Less effects of discounting	(27,223		)	(5,482		)
Lease liabilities recognized	$	253,532		$	28,471

Schedule of Maturity of Operating Leases

The following table reflects the undiscounted future cash flows utilized in the calculation of the lease liabilities recorded at June 30, 2019:

	June 30, 2019
(in thousands)	Operating Leases			Finance Lease
July 1, 2019 — June 30, 2020	$	72,320		$	6,802
July 1, 2020 — June 30, 2021	64,198			5,846
July 1, 2021 — June 30, 2022	58,280			5,562
July 1, 2022 — June 30, 2023	45,166			5,279
July 1, 2023 — June 30, 2024	21,977			4,995
Remaining periods	18,814			5,469
Total undiscounted future cash flows	280,755			33,953
Less effects of discounting	(27,223		)	(5,482		)
Lease liabilities recognized	$	253,532		$	28,471

Schedule of Future Minimum Lease Payments

As of December 31, 2018 the following future minimum cash payments were required under leases for office space:

(in thousands)	December 31, 2018
2019	$	9,849
2020	10,790
2021	11,000
2022	11,130
2023	11,433
Remaining periods	20,831
Total future minimum lease payments	$	75,033

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SUPPLEMENTAL CASH FLOW INFORMATION (Tables)

6 Months Ended

Jun. 30, 2019

Supplemental Cash Flow Elements [Abstract]

Schedule of Supplemental Cash Flow Information

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Cash paid during the period for:
Interest (net of capitalized amounts of $19,381, $9,233, $20,121 and $9,389, respectively) (1)	$	14,396	$	22,954	$	32,984	$	23,343
Income taxes	$	1,200	$	—	$	1,206	$	—
Cash received for income tax refunds	$	335	$	717	$	336	$	718

________________________________________

(1)

The six months ended June 30, 2019 includes $17.6 million in interest paid upon the redemption of Resolute’s senior notes and credit facility on March 1, 2019.

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ACQUISITIONS (Tables)

6 Months Ended

Jun. 30, 2019

Business Combinations [Abstract]

Schedule of Consideration Transferred in Acquisition

The acquisition date fair value of the consideration transferred totaled $820.3 million, which consisted of cash, common stock, and a newly created series of preferred stock (see Note 5 for more information on the preferred stock) as follows:

(in thousands)	Fair Value of Consideration Transferred
Cash	$	325,677
Common stock (5,652 shares issued)	413,015
Preferred stock (63 shares issued)	81,620
	$	820,312

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed

The following table sets forth the preliminary purchase price allocation:

(in thousands)	March 1, 2019
Cash	$	41,236
Accounts receivable	50,739
Other current assets	13,280
Proved oil and gas properties	692,600
Unproved oil and gas properties	1,054,200
Fixed assets	5,355
Goodwill	107,341
Other assets	142
Current liabilities	(202,735		)
Long-term debt	(870,000		)
Deferred income taxes	(62,409		)
Asset retirement obligation	(9,437		)
Total identifiable net assets	$	820,312

Schedule of Pro Forma information

	Three Months Ended June 30,				Six Months Ended June 30,
(in thousands)	2019		2018		2019		2018
Revenue	$	546,463	$	625,332	$	1,176,556	$	1,263,410
Net income	$	109,365	$	148,486	$	121,909	$	335,544
Net income per share:
Basic	$	1.07	$	1.48	$	1.18	$	3.33
Diluted	$	1.07	$	1.47	$	1.18	$	3.33

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BASIS OF PRESENTATION - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jan. 01, 2019
Oil and Gas, Delivery Commitment [Line Items]
Discount rate for calculating present value of estimated future net revenues from proved reserves (as a percent)	10.00%
Decline in ceiling limitation that would have resulted in impairment (as a percent)	4.00%
Lease liabilities recognized	$ 253,532
Operating lease right-of-use assets	$ 243,089
Minimum
Oil and Gas, Delivery Commitment [Line Items]
Oil and gas delivery commitments and contracts, period	1 month
Accounting Standards Update 2016-02
Oil and Gas, Delivery Commitment [Line Items]
Lease liabilities recognized		$ 276,900
Operating lease right-of-use assets		$ 265,000

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LONG-TERM DEBT - Long-Term Debt Outstanding (Details) - USD ($)	Jun. 30, 2019	Dec. 31, 2018	Apr. 30, 2017	Jun. 30, 2014
Debt Instrument
Long-term debt principal	$ 2,000,000,000	$ 1,500,000,000
Unamortized debt issuance costs and discount	(15,770,000)	(11,446,000)
Long-term debt, net	1,984,230,000	1,488,554,000
4.375% Notes due 2024
Debt Instrument
Long-term debt principal	750,000,000	750,000,000
Unamortized debt issuance costs and discount	(3,982,000)	(4,439,000)
Long-term debt, net	$ 746,018,000	745,561,000
4.375% Notes due 2024 | Senior Notes
Debt Instrument
Long-term debt principal				$ 750,000,000
Stated interest rate (as a percent)	4.375%			4.375%
3.90% Notes due 2027
Debt Instrument
Long-term debt principal	$ 750,000,000	750,000,000
Unamortized debt issuance costs and discount	(6,651,000)	(7,007,000)
Long-term debt, net	$ 743,349,000	742,993,000
3.90% Notes due 2027 | Senior Notes
Debt Instrument
Long-term debt principal			$ 750,000,000
Stated interest rate (as a percent)	3.90%		3.90%
Unamortized debt issuance costs	$ 5,100,000	5,400,000
Unamortized discount	1,500,000	1,600,000
4.375% Notes due 2029
Debt Instrument
Long-term debt principal	500,000,000	0
Unamortized debt issuance costs and discount	(5,137,000)	0
Long-term debt, net	$ 494,863,000	$ 0
4.375% Notes due 2029 | Senior Notes
Debt Instrument
Stated interest rate (as a percent)	4.375%
Unamortized debt issuance costs	$ 4,500,000
Unamortized discount	$ 700,000

XML

LONG-TERM DEBT - Bank Debt Narrative (Details) - USD ($)	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019	Feb. 05, 2019	Dec. 31, 2018
Line of Credit Facility [Line Items]
Unamortized debt issuance costs and discount	$ 15,770,000	$ 15,770,000		$ 11,446,000
Revolving Credit Facility
Line of Credit Facility [Line Items]
Aggregate commitments under credit facility			$ 1,250,000,000
Maximum borrowing capacity including accordion feature			1,500,000,000
Borrowings outstanding	0	0
Unused borrowing availability	1,248,000,000	$ 1,248,000,000
Credit facility borrowings during period	528,000,000.0
Credit facility repayments during period	528,000,000
Debt-to-capital ratio (as a percent)		65.00%
Unamortized debt issuance costs and discount	4,600,000	$ 4,600,000	$ 3,000,000.0	$ 2,200,000
Letter of Credit
Line of Credit Facility [Line Items]
Borrowings outstanding	$ 2,500,000	$ 2,500,000
Minimum | Revolving Credit Facility
Line of Credit Facility [Line Items]
Commitment fee rate (as a percent)		0.125%
Maximum | Revolving Credit Facility
Line of Credit Facility [Line Items]
Commitment fee rate (as a percent)		0.35%
London Interbank Offered Rate (LIBOR) | Minimum | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate margin (as a percent)		1.125%
London Interbank Offered Rate (LIBOR) | Maximum | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate margin (as a percent)		2.00%
Base Rate | Minimum | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate margin (as a percent)		0.125%
Base Rate | Maximum | Revolving Credit Facility
Line of Credit Facility [Line Items]
Interest rate margin (as a percent)		1.00%

XML

LONG-TERM DEBT - Senior Notes Narrative (Details) - USD ($)		1 Months Ended	6 Months Ended
	Mar. 08, 2019	Apr. 30, 2017	Jun. 30, 2019	Jun. 30, 2018	Dec. 31, 2018	Jun. 30, 2014
Debt Instrument
Principal amount			$ 2,000,000,000		$ 1,500,000,000
Proceeds from issuance of long-term debt			1,710,310,000	$ 0
4.375% Notes due 2029
Debt Instrument
Principal amount			500,000,000		0
3.90% Notes due 2027
Debt Instrument
Principal amount			750,000,000		750,000,000
4.375% Notes due 2024
Debt Instrument
Principal amount			$ 750,000,000		$ 750,000,000
Senior Notes | 4.375% Notes due 2029
Debt Instrument
Principal amount	$ 500,000,000
Stated interest rate (as a percent)			4.375%
Issuance price relative to par value (as a percent)	99.862%
Effective rate (as a percent)	4.392%		4.50%
Proceeds from issuance of long-term debt	$ 494,700,000
Senior Notes | 3.90% Notes due 2027
Debt Instrument
Principal amount		$ 750,000,000
Stated interest rate (as a percent)		3.90%	3.90%
Issuance price relative to par value (as a percent)		99.748%
Effective rate (as a percent)		3.93%	4.01%
Senior Notes | 4.375% Notes due 2024
Debt Instrument
Principal amount						$ 750,000,000
Stated interest rate (as a percent)			4.375%			4.375%
Effective rate (as a percent)			4.50%

XML

DERIVATIVE INSTRUMENTS - Derivative Contracts (Details)	6 Months Ended
	Jun. 30, 2019 MMBTU $ / bbl $ / MMBTU bbl
Oil Collar WTI Index | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	5,888,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	54.81
Weighted Avg Price - Ceiling (USD per unit)	68.09
Oil Collar WTI Index | 2019 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	736,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	3,312,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	54.28
Weighted Avg Price - Ceiling (USD per unit)	67.88
Oil Collar WTI Index | Third Quarter - 2019 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	368,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	2,576,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	55.50
Weighted Avg Price - Ceiling (USD per unit)	68.36
Oil Collar WTI Index | Fourth Quarter - 2019 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	368,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	3,648,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	52.89
Weighted Avg Price - Ceiling (USD per unit)	65.74
Oil Collar WTI Index | 2020 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	1,464,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | First Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	1,820,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	54.90
Weighted Avg Price - Ceiling (USD per unit)	68.49
Oil Collar WTI Index | First Quarter - 2020 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	364,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | Second Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	1,092,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	51.50
Weighted Avg Price - Ceiling (USD per unit)	63.59
Oil Collar WTI Index | Second Quarter - 2020 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	364,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | Third Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	368,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	62.15
Oil Collar WTI Index | Third Quarter - 2020 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	368,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Oil Collar WTI Index | Fourth Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	368,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	62.15
Oil Collar WTI Index | Fourth Quarter - 2020 | Subsequent at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	368,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit)	50.00
Weighted Avg Price - Ceiling (USD per unit)	63.45
Gas Collar PEPL Index | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	23,000,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.92
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.33
Gas Collar PEPL Index | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	12,880,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.93
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.32
Gas Collar PEPL Index | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	10,120,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.92
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.36
Gas Collar PEPL Index | 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	15,510,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.91
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.32
Gas Collar PEPL Index | First Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	7,280,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.93
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.36
Gas Collar PEPL Index | Second Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	4,550,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.91
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.28
Gas Collar PEPL Index | Third Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	1,840,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.85
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.31
Gas Collar PEPL Index | Fourth Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	1,840,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.85
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	2.31
Gas Collar Perm EP | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	13,800,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.43
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.74
Gas Collar Perm EP | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	8,280,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.46
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.76
Gas Collar Perm EP | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	5,520,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.38
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.71
Gas Collar Perm EP | 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	10,050,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.38
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.75
Gas Collar Perm EP | First Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	3,640,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.40
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.79
Gas Collar Perm EP | Second Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	2,730,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.40
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.82
Gas Collar Perm EP | Third Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	1,840,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.35
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.66
Gas Collar Perm EP | Fourth Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	1,840,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.35
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.66
Gas Collar Waha | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	11,040,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.48
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.82
Gas Collar Waha | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	5,520,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.48
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.82
Gas Collar Waha | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	5,520,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.48
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.82
Gas Collar Waha | 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	7,280,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.53
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.91
Gas Collar Waha | First Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	4,550,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.50
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.87
Gas Collar Waha | Second Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	2,730,000
Weighted Average Price
Weighted Avg Price - Floor (USD per unit) | $ / MMBTU	1.57
Weighted Avg Price - Ceiling (USD per unit) | $ / MMBTU	1.97
Oil Basis Swaps WTI Midland Index | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	6,532,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	(6.84)
Oil Basis Swaps WTI Midland Index | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	3,266,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	(7.36)
Oil Basis Swaps WTI Midland Index | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	3,266,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	(6.32)
Oil Basis Swaps WTI Midland Index | 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	4,930,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	0.33
Oil Basis Swaps WTI Midland Index | First Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	2,093,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	0.16
Oil Basis Swaps WTI Midland Index | Second Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	1,365,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	0.19
Oil Basis Swaps WTI Midland Index | Third Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	736,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	0.71
Oil Basis Swaps WTI Midland Index | Fourth Quarter - 2020 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	736,000
Weighted Average Price
Weighted Avg Differential (USD per Bbl)	0.71
Oil Swaps WTI Index | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	920,000
Weighted Average Price
Weighted Avg Price (USD per unit)	64.54
Oil Swaps WTI Index | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	460,000
Weighted Average Price
Weighted Avg Price (USD per unit)	64.54
Oil Swaps WTI Index | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	460,000
Weighted Average Price
Weighted Avg Price (USD per unit)	64.54
Gas Swaps Henry Hub | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	6,440,000
Weighted Average Price
Weighted Avg Price (USD per unit)	3.00
Gas Swaps Henry Hub | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	3,220,000
Weighted Average Price
Weighted Avg Price (USD per unit)	3.00
Gas Swaps Henry Hub | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (MMBtu) | MMBTU	3,220,000
Weighted Average Price
Weighted Avg Price (USD per unit)	3.00
Oil Sold Calls WTI Index | 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	675,280
Weighted Average Price
Weighted Avg Price - Ceiling (USD per unit)	64.36
Oil Sold Calls WTI Index | Third Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	337,640
Weighted Average Price
Weighted Avg Price - Ceiling (USD per unit)	64.36
Oil Sold Calls WTI Index | Fourth Quarter - 2019 | Outstanding at end of period
Fair values of derivative assets and liabilities
Volume (Bbls) | bbl	337,640
Weighted Average Price
Weighted Avg Price - Ceiling (USD per unit)	64.36

XML

DERIVATIVE INSTRUMENTS - (Gain) Loss on Derivative Instruments (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Derivative [Line Items]
(Increase) decrease in fair value of derivative instruments, net:	$ (34,531)	$ 14,169	$ 71,870	$ (2,379)
Cash (receipts) payments on derivative instruments, net:	(6,237)	7,530	2,814	19,919
(Gain) loss on derivative instruments, net	(40,768)	21,699	74,684	17,540
Gas contracts
Derivative [Line Items]
(Increase) decrease in fair value of derivative instruments, net:	(6,370)	14,566	(16,216)	2,777
Cash (receipts) payments on derivative instruments, net:	(21,176)	(9,918)	(17,412)	(15,037)
Oil contracts
Derivative [Line Items]
(Increase) decrease in fair value of derivative instruments, net:	(28,161)	(397)	88,086	(5,156)
Cash (receipts) payments on derivative instruments, net:	$ 14,939	$ 17,448	$ 20,226	$ 34,956

XML

DERIVATIVE INSTRUMENTS - Derivative Assets and Liabilities (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Asset
Total gross amounts presented in the balance sheet	$ 42,957	$ 101,939
Liability
Total gross amounts presented in the balance sheet	50,056	27,627
Not Designated as Hedging Instrument
Asset
Total gross amounts presented in the balance sheet	43,570	111,185
Less: gross amounts not offset in the balance sheet	(23,966)	(29,894)
Net amount	19,604	81,291
Liability
Total gross amounts presented in the balance sheet	50,896	29,894
Less: gross amounts not offset in the balance sheet	(23,966)	(29,894)
Net amount	26,930	0
Current assets — Derivative instruments | Not Designated as Hedging Instrument | Oil contracts
Asset
Total gross amounts presented in the balance sheet	23,060	94,240
Current assets — Derivative instruments | Not Designated as Hedging Instrument | Gas contracts
Asset
Total gross amounts presented in the balance sheet	19,897	7,699
Non-current assets — Derivative instruments | Not Designated as Hedging Instrument | Oil contracts
Asset
Total gross amounts presented in the balance sheet	613	9,246
Current liabilities — Derivative instruments | Not Designated as Hedging Instrument | Oil contracts
Liability
Total gross amounts presented in the balance sheet	50,056	23,378
Current liabilities — Derivative instruments | Not Designated as Hedging Instrument | Gas contracts
Liability
Total gross amounts presented in the balance sheet		4,249
Non-current liabilities — Derivative instruments | Not Designated as Hedging Instrument | Oil contracts
Liability
Total gross amounts presented in the balance sheet	171	311
Non-current liabilities — Derivative instruments | Not Designated as Hedging Instrument | Gas contracts
Liability
Total gross amounts presented in the balance sheet	$ 669	$ 1,956

XML

FAIR VALUE MEASUREMENTS - Summary (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018	Apr. 30, 2017	Jun. 30, 2014
Financial Assets (Liabilities):
Derivative instruments — assets	$ 42,957	$ 101,939
Derivative instruments — liabilities	$ (50,056)	(27,627)
4.375% Notes due 2024 | Senior Notes
Financial Assets (Liabilities):
Stated interest rate (as a percent)	4.375%			4.375%
3.90% Notes due 2027 | Senior Notes
Financial Assets (Liabilities):
Stated interest rate (as a percent)	3.90%		3.90%
4.375% Notes due 2029 | Senior Notes
Financial Assets (Liabilities):
Stated interest rate (as a percent)	4.375%
Book Value
Financial Assets (Liabilities):
Derivative instruments — assets	$ 43,570	111,185
Derivative instruments — liabilities	(50,896)	(29,894)
Book Value | 4.375% Notes due 2024
Financial Assets (Liabilities):
Long-term debt	(750,000)	(750,000)
Book Value | 3.90% Notes due 2027
Financial Assets (Liabilities):
Long-term debt	(750,000)	(750,000)
Book Value | 4.375% Notes due 2029
Financial Assets (Liabilities):
Long-term debt	(500,000)	0
Fair Value
Financial Assets (Liabilities):
Derivative instruments — assets	43,570	111,185
Derivative instruments — liabilities	(50,896)	(29,894)
Fair Value | 4.375% Notes due 2024
Financial Assets (Liabilities):
Long-term debt	(793,913)	(744,578)
Fair Value | 3.90% Notes due 2027
Financial Assets (Liabilities):
Long-term debt	(769,643)	(701,273)
Fair Value | 4.375% Notes due 2029
Financial Assets (Liabilities):
Long-term debt	$ (530,535)	$ 0

XML

FAIR VALUE MEASUREMENTS - Narrative (Details) - USD ($) $ in Millions	Jun. 30, 2019	Dec. 31, 2018
Other Financial Instruments
Accrued operating expenses	$ 82.8	$ 69.1
Accrued payroll related general and administrative expenses		47.4
Overdrawn account accrual		35.8
Allowance for Trade Receivables
Other Financial Instruments
Aggregate allowance for doubtful accounts	$ 3.2	$ 2.7

XML

CAPITAL STOCK - Narrative (Details) - USD ($) $ / shares in Units, $ in Thousands	1 Months Ended		3 Months Ended				6 Months Ended	12 Months Ended
	May 31, 2019	Mar. 31, 2019	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Dec. 31, 2018
Class of Stock [Line Items]
Common stock authorized (shares)			200,000,000				200,000,000	200,000,000
Preferred stock authorized (shares)			15,000,000				15,000,000
Common stock outstanding (shares)			101,500,000				101,500,000
Preferred stock dividend rate (as a percent)							8.125%	8.125%
Preferred stock, par value (USD per share)			$ 0.01				$ 0.01
Preferred stock liquidation preference per share (USD per share)			$ 1,000				$ 1,000
Preferred stock, liquidation preference			$ 62,500				$ 62,500
Stock issued upon conversion of preferred stock (shares)			8.0421				8.0421
Price received per share upon conversion (USD per share)			$ 471.40				$ 471.40
Dividends
Dividends declared per common share (USD per share)	$ 0.20
Dividends declared from retained earnings	$ 20,300		$ 20,330	$ 20,308	$ 15,241	$ 15,271
Dividends declared per preferred share (USD per share)	$ 20.31
Preferred stock cash dividends	$ 1,300
Series A Preferred Stock
Class of Stock [Line Items]
Preferred stock authorized (shares)			62,500				62,500
Issuance of stock for acquisition (shares)		62,500

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STOCK-BASED COMPENSATION - Summary (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Options, Restricted Stock and Unit Awards
Stock compensation cost	$ 11,924	$ 8,693	$ 25,171	$ 21,111
Less amounts capitalized to oil and gas properties	(5,430)	(5,598)	(11,964)	(11,286)
Stock compensation expense	6,494	3,095	13,207	9,825
Restricted stock awards:
Options, Restricted Stock and Unit Awards
Stock compensation cost	11,528	8,056	24,153	19,857
Performance stock awards
Options, Restricted Stock and Unit Awards
Stock compensation cost	5,535	3,809	10,929	10,538
Service-based stock awards
Options, Restricted Stock and Unit Awards
Stock compensation cost	5,993	4,247	13,224	9,319
Stock option awards
Options, Restricted Stock and Unit Awards
Stock compensation cost	$ 396	$ 637	$ 1,018	$ 1,254

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ASSET RETIREMENT OBLIGATIONS - Summary (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Dec. 31, 2018
Asset Retirement Obligations
Balance at beginning of year	$ 166,904
Liabilities incurred	12,611
Liability settlements and disposals	(11,771)
Accretion expense	3,714
Revisions of estimated liabilities	2,415
Balance at end of year	173,873
Less current obligation	(16,492)
Long-term asset retirement obligation	$ 157,381	$ 152,758

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ASSET RETIREMENT OBLIGATIONS - Narrative (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 01, 2019
Resolute Energy Corporation
Business Acquisition [Line Items]
Liabilities incurred	$ 9,400	$ 9,437

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EARNINGS PER SHARE - Summary (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended				6 Months Ended
	Jun. 30, 2019	Mar. 31, 2019	Jun. 30, 2018	Mar. 31, 2018	Jun. 30, 2019	Jun. 30, 2018
Income (Numerator)
Net income	$ 109,309	$ 26,316	$ 140,997	$ 186,318	$ 135,625	$ 327,315
Less: net income attributable to participating securities	(1,596)		(1,892)		(2,067)	(4,546)
Less: preferred stock dividends	(1,270)		0		(2,539)	0
Basic EPS - Income available to common stockholders	106,443		139,105		131,019	322,769
Effects of dilutive securities - options (shares)					0	1
Diluted EPS - Income available to common stockholders and assumed conversions	$ 106,443		$ 139,105		$ 131,019	$ 322,770
Shares (Denominator)
Basic EPS - Income available to common stockholders (shares)	99,658,000		93,728,000		97,800,000	93,713,000
Effects of dilutive securities - options (shares)	7,000		31,000		9,000	35,000
Diluted EPS - Income available to common stockholders and assumed conversions (shares)	99,665,000		93,759,000		97,809,000	93,748,000
Per-Share Amount
Basic EPS - Income available to common stockholders (USD per share)	$ 1.07		$ 1.48		$ 1.34	$ 3.44
Diluted EPS - Income available to common stockholders and assumed conversions (USD per share)	$ 1.07		$ 1.48		$ 1.34	$ 3.44
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Document Period End Date					Jun. 30, 2019
Employee Stock Option
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Excluded antidilutive securities (shares)	387,500		292,100		391,100	295,600
Convertible Preferred Stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Excluded antidilutive securities (shares)	502,600				502,600

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INCOME TAXES - Components of the Provision for Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Income Tax Expense (Benefit)
Current tax (benefit)	$ 0	$ (717)	$ 0	$ (717)
Deferred tax expense	34,046	42,783	42,119	99,732
Income tax expense (benefit)	$ 34,046	$ 42,066	$ 42,119	$ 99,015
Combined federal and state effective income tax rate (as a percent)	23.70%	23.00%	23.70%	23.20%

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INCOME TAXES - Narrative (Details) - USD ($)	Jun. 30, 2019	Mar. 01, 2019	Dec. 31, 2018
Income Tax Contingency [Line Items]
U.S. net tax operating loss carryforward			$ 1,160,000,000
Unrecognized tax benefits that would impact the entity's effective rate	$ 0
Provisions for interest or penalties related to uncertain tax positions	$ 0
Resolute Energy Corporation
Income Tax Contingency [Line Items]
Deferred tax liability		$ 62,409,000
Oil Recovery and Marginal Well Credits
Income Tax Contingency [Line Items]
Tax credit carryforward			$ 3,500,000

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COMMITMENTS AND CONTINGENCIES - Narrative (Details) $ in Thousands	6 Months Ended	12 Months Ended
	Jun. 30, 2019 USD ($) Bcf	Dec. 31, 2018 USD ($)
Construction, Drilling and Purchase Commitments
Right-of-use asset obtained in exchange for operating leases	$ 49,100
Future minimum payments due on operating leases		$ 75,033
Minimum
Construction, Drilling and Purchase Commitments
Oil and gas delivery commitments and contracts, period	1 month
Drilling Commitments
Construction, Drilling and Purchase Commitments
Commitments for purchases and other expenditures	$ 304,600
Gathering System Construction
Construction, Drilling and Purchase Commitments
Commitments for purchases and other expenditures	$ 19,200
Natural Gas Sales Contracts
Construction, Drilling and Purchase Commitments
Oil and gas delivery commitments and contracts, remaining contractual volume (bcf) | Bcf	290.7
Oil and gas delivery commitments and contracts, period	5 years 7 months 6 days
Maximum financial commitment resulting from inability to meet gas delivery commitments	$ 303,300
Gas Gathering and Processing Agreements
Construction, Drilling and Purchase Commitments
Oil and gas delivery commitments and contracts, period	9 years 6 months
Maximum financial commitment resulting from inability to meet gas delivery commitments	$ 655,200
Minimum Volume Agreement
Construction, Drilling and Purchase Commitments
Maximum financial commitment resulting from inability to meet gas delivery commitments	153,300
Commitment liability	4,600
Other Transportation and Delivery Commitments and Facilities Commitments
Construction, Drilling and Purchase Commitments
Maximum financial commitment resulting from inability to meet gas delivery commitments	$ 70,500
Office Space | Minimum
Construction, Drilling and Purchase Commitments
Remaining lease term	4 years 10 months 24 days
Office Space | Maximum
Construction, Drilling and Purchase Commitments
Remaining lease term	7 years 2 months 12 days
Energy Equipment | Minimum
Construction, Drilling and Purchase Commitments
Remaining lease term	1 month
Energy Equipment | Maximum
Construction, Drilling and Purchase Commitments
Remaining lease term	11 years 3 months 18 days
Gathering System
Construction, Drilling and Purchase Commitments
Remaining lease term	6 years 2 months 12 days
Exploration and Development Equipment | Maximum
Construction, Drilling and Purchase Commitments
Remaining lease term	12 months
Compressor Equipment
Construction, Drilling and Purchase Commitments
Future minimum payments due on operating leases		$ 34,800
Compressor Equipment | Minimum
Construction, Drilling and Purchase Commitments
Remaining lease term		1 month
Compressor Equipment | Maximum
Construction, Drilling and Purchase Commitments
Remaining lease term		35 months

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COMMITMENTS AND CONTINGENCIES - Supplemental Balance Sheet Information (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Dec. 31, 2018
Assets:
Operating lease right-of-use assets	$ 243,089
Finance lease right-of-use asset	27,042
Total right-of-use assets	270,131
Liabilities:
Operating lease liabilities — current	62,119	$ 0
Operating lease liabilities — non-current	191,413	$ 0
Finance lease liability — current	6,576
Finance lease liability — non-current	21,895
Total lease liabilities	$ 282,003

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COMMITMENTS AND CONTINGENCIES - Lease Cost (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2019
Finance lease cost:
Amortization of right-of-use asset	$ 1,097	$ 2,193
Interest on lease liability	457	943
Operating lease cost:
Short-term lease cost	162,334	317,044
Total lease cost	176,688	345,277
Production expense
Operating lease cost:
Operating lease cost	3,943	7,777
Gas gathering and other expense
Operating lease cost:
Operating lease cost	6,522	12,686
General and administrative expense
Operating lease cost:
Operating lease cost	$ 2,335	$ 4,634

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COMMITMENTS AND CONTINGENCIES - Cash Paid for Leases (Details) - USD ($) $ in Thousands	6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018
Cash paid for amounts included in the measurement of lease liabilities:
Financing cash outflows from finance lease	$ 1,555	$ 0
Operating cash outflows from operating leases	25,466
Cash paid for short-term leases and variable lease payments:
Investing cash outflows from operating leases	$ 309,150

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COMMITMENTS AND CONTINGENCIES - Weighted-Average Remaining Lease Term and Discount Rate (Details)	Jun. 30, 2019
Weighted-average remaining lease term (in years):
Finance lease	6 years 2 months 12 days
Operating leases	4 years 6 months
Weighted-average discount rate:
Finance leases (as a percent)	6.50%
Operating leases (as a percent)	4.00%

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COMMITMENTS AND CONTINGENCIES - Maturity Analysis of Leases (Details) $ in Thousands	Jun. 30, 2019 USD ($)
Operating Leases
July 1, 2019 — June 30, 2020	$ 72,320
July 1, 2020 — June 30, 2021	64,198
July 1, 2021 — June 30, 2022	58,280
July 1, 2022 — June 30, 2023	45,166
July 1, 2023 — June 30, 2024	21,977
Remaining periods	18,814
Total undiscounted future cash flows	280,755
Less effects of discounting	(27,223)
Lease liabilities recognized	253,532
Finance Lease
July 1, 2019 — June 30, 2020	6,802
July 1, 2020 — June 30, 2021	5,846
July 1, 2021 — June 30, 2022	5,562
July 1, 2022 — June 30, 2023	5,279
July 1, 2023 — June 30, 2024	4,995
Remaining periods	5,469
Total undiscounted future cash flows	33,953
Less effects of discounting	(5,482)
Lease liabilities recognized	$ 28,471

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COMMITMENTS AND CONTINGENCIES - Future Minimum Lease Payments (Details) $ in Thousands	Dec. 31, 2018 USD ($)
Commitments and Contingencies Disclosure [Abstract]
2019	$ 9,849
2020	10,790
2021	11,000
2022	11,130
2023	11,433
Remaining periods	20,831
Total future minimum lease payments	$ 75,033

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SUPPLEMENTAL CASH FLOW INFORMATION - Summary (Details) - USD ($) $ in Thousands		3 Months Ended		6 Months Ended
	Mar. 01, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Cash paid during the period for:
Interest (net of capitalized amounts of $19,381, $9,233, $20,121 and $9,389, respectively) (1)		$ 14,396	$ 22,954	$ 32,984	$ 23,343
Income taxes		1,200	0	1,206	0
Cash received for income tax refunds		335	717	336	718
Interest capitalized		$ 19,381	$ 9,233	$ 20,121	$ 9,389
Resolute Energy Corporation
Cash paid during the period for:
Interest (net of capitalized amounts of $19,381, $9,233, $20,121 and $9,389, respectively) (1)	$ 17,600

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RELATED PARTY TRANSACTIONS - Narrative (Details) - USD ($) $ in Millions	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Related Party Transaction [Line Items]
Document Period End Date			Jun. 30, 2019
Helmerich & Payne
Related Party Transaction [Line Items]
Contract drilling service costs	$ 22.1	$ 16.4	$ 46.6	$ 40.0

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ACQUISITIONS - Narrative (Details) - USD ($)		3 Months Ended		4 Months Ended	6 Months Ended
	Mar. 01, 2019	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2019	Jun. 30, 2018	Mar. 08, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Purchase price allocation period					12 months
Loss on early extinguishment of debt	$ (4,300,000)	$ 0	$ 0		$ (4,250,000)	$ 0
Goodwill		$ 727,573,000		$ 727,573,000	$ 727,573,000			$ 620,232,000
Resolute Energy Corporation
Business Acquisition [Line Items]
Proportion of voting interests acquired (as a percent)	100.00%
Total consideration transferred	$ 820,312,000
Long-term debt acquired	870,000,000
Goodwill	107,341,000
Acquisition-related costs	8,400,000
Revenue of acquiree since acquisition date				100,000,000.0
Direct operating expenses of acquiree since acquisition date				$ 21,900,000
Senior Notes | Resolute Energy Corporation
Business Acquisition [Line Items]
Long-term debt acquired	600,000,000.0
Senior Notes | 4.375% Notes due 2029
Business Acquisition [Line Items]
Senior notes principal							$ 500,000,000
Stated interest rate (as a percent)		4.375%		4.375%	4.375%
Credit Facility | Resolute Energy Corporation
Business Acquisition [Line Items]
Long-term debt acquired	270,000,000.0
Resolute Energy Corporation
Business Acquisition [Line Items]
Acquisition-related costs	$ 60,000,000.0

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ACQUISITIONS - Consideration Transferred (Details) - Resolute Energy Corporation shares in Thousands, $ in Thousands	Mar. 01, 2019 USD ($) shares
Business Acquisition [Line Items]
Cash	$ 325,677
Total consideration transferred	820,312
Common stock (5,652 shares issued)
Business Acquisition [Line Items]
Stock	$ 413,015
Stock issued in acquisition (shares) | shares	5,652
Preferred stock (63 shares issued)
Business Acquisition [Line Items]
Stock	$ 81,620
Stock issued in acquisition (shares) | shares	63

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ACQUISITIONS - Assets Acquired and Liabilities Assumed (Details) - USD ($) $ in Thousands	Jun. 30, 2019	Mar. 01, 2019	Dec. 31, 2018
Business Acquisition [Line Items]
Goodwill	$ 727,573		$ 620,232
Resolute Energy Corporation
Business Acquisition [Line Items]
Cash		$ 41,236
Accounts receivable		50,739
Other current assets		13,280
Proved oil and gas properties		692,600
Unproved oil and gas properties		1,054,200
Fixed assets		5,355
Other assets		142
Goodwill		107,341
Current liabilities		(202,735)
Long-term debt		(870,000)
Deferred income taxes		(62,409)
Asset retirement obligation	$ (9,400)	(9,437)
Total identifiable net assets		$ 820,312

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ACQUISITIONS - Pro Forma Information (Details) - Resolute Energy Corporation - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		6 Months Ended
	Jun. 30, 2019	Jun. 30, 2018	Jun. 30, 2019	Jun. 30, 2018
Business Acquisition, Pro Forma Information [Abstract]
Revenue	$ 546,463	$ 625,332	$ 1,176,556	$ 1,263,410
Net income	$ 109,365	$ 148,486	$ 121,909	$ 335,544
Net income per share:
Basic (USD per share)	$ 1.07	$ 1.48	$ 1.18	$ 3.33
Diluted (USD per share)	$ 1.07	$ 1.47	$ 1.18	$ 3.33