Cimarex Energy Announces Year-End Reserves
Reserves added from the Magnum Hunter Resources, Inc. acquisition and other transactions totaled 887.6 Bcfe. Reserves added by drilling and revisions totaled 247.8 Bcfe and replaced 192 percent of production.
December 31, 2005 Gas Oil Total (MMcf) (MBbl) (MMcfe) Total proved reserves Beginning of year 364,641 14,063 449,019 Revisions of previous estimates 9,534 270 11,154 Extensions and discoveries 209,758 4,477 236,620 Purchase of reserves 531,862 59,288 887,590 Production (100,272) (4,804) (129,096) Sales of properties (11,041) (8,584) (62,545) End of year 1,004,482 64,710 1,392,742 Proved developed reserves 820,244 51,521 1,129,370 Equity investment proved reserves not included above(1) 16,914 3,012 34,986 Costs incurred - 2005 ($ MM) Acquisition of Magnum Hunter and other properties $1,862 Exploration and development 601 Total oil and gas expenditures $2,463 (1) The Financial Accounting Standards Board (FASB) pronouncement EITF No. 04-5 "Determining Whether a General Partner, or the General Partners as a Group, Controls a Limited Partnership or Similar Entity When the Limited Partners Have Certain Rights" was effective in June 2005. This pronouncement resulted in certain entities acquired as part of the Magnum Hunter merger not being consolidated. Exploration and Development Activity
Cimarex drilled 382 gross (210.4 net) wells during 2005, realizing a success rate of 88 percent. Exploration and development (E&D) capital expenditures for 2005 totaled $601 million, up 115 percent over 2004. At the present time we have 35 rigs under contract and expect 2006 E&D expenditures will approximate $1 billion.
Cimarex drilled 185 gross (93.4 net) wells in the Mid-Continent region during 2005 realizing a 96 percent success rate. The drilling principally occurred in the Texas Panhandle and the Anadarko Basin. In the Texas Panhandle Granite Wash formation, Cimarex drilled 36 gross (27.5 net) wells with a 100 percent success rate. Gross proved reserves for these wells averaged 1.0 Bcfe per well. Four operated rigs are currently drilling in the Granite Wash play, six are in the Anadarko Basin and two others are in southern Oklahoma.
In the Permian Basin, Cimarex drilled 117 gross (75.0 net) wells during 2005 and had an 87 percent success rate. The majority of the drilling occurred in southeast New Mexico where 74 gross (45.7 net) wells were drilled with a 95 percent success rate in the Morrow, Atoka and Strawn formations. Gross proved reserves averaged 1.3 Bcfe per well. In the west Texas portion of the Permian, Cimarex drilled 43 gross (29.3 net) wells including: thirteen Devonian wells in the Arbol de Nada field, of Winkler County and two Elleburger/Wolf Camp wells in Val Verde County's Will-O field. Cimarex currently has eight operated rigs drilling in southeast New Mexico and three in Texas.
Cimarex drilled 44 gross (27.7 net) Gulf Coast area wells during 2005, realizing a 66 percent success rate. The majority of the drilling occurred in Liberty County, Texas; southern Louisiana; south Texas; and Mississippi. The Liberty County program targets the Yegua and Cook Mountain formations at 10,500 feet. In 2005, Cimarex drilled 14 gross (9.3 net) wells in this project realizing a 50 percent success rate. As a result of successful drilling, Liberty County gross production increased to 72 MMcfe per day in 2005, an 80 percent increase over 2004.
In the fourth quarter of 2005, Cimarex drilled a discovery in Vermilion Parish, Louisiana. The Donald Harrington #1 (100% working interest) at the Cherokee Creek prospect was drilled to a total depth of 16,200 feet and was perforated in a 90 foot gross interval in the Marg tex formation. First production occurred in mid-January 2006 at a rate of 26 million cubic feet of gas and 150 barrels of condensate.
Cimarex plans to have two or three rigs operating continuously throughout 2006 in south Louisiana and two in Liberty County.
Gulf of Mexico
Including wells drilled by Magnum Hunter prior to closing, Cimarex drilled or participated in 31 gross (10.9 net) wells in the Gulf of Mexico during 2005. Of these, 82 percent were completed as producers. Ten operated wells were drilled, mostly in the Main Pass and West Cameron areas, and we participated as a non-operator in 21 wells. The non-operated wells were drilled in the East Cameron, West Cameron and South Timbalier areas. Of the 31 gross wells, five were initiated and completed by Cimarex since the June 7, 2005 closing of the Magnum Hunter merger.
Cimarex drilled the West Cameron Block 295 #3 (30% working interest) in the fourth quarter of 2005. The #3 well was drilled to a depth of 16,286 feet and logged 110 feet of net (94 feet true vertical depth) pay in two zones. Production is expected to commence during May 2006 at a rate of approximately 10 MMcf per day.
Hurricane and other storm related activity is estimated to have negatively impacted production by 41-45 MMcfe/d in the fourth quarter. At December 31, 2005 the amount of production curtailed because of the hurricanes was approximately 20-25 MMcfe/d, the majority of which is expected to be restored by the end of the first quarter 2006.
At the present time, Cimarex has two rigs working on company-operated wells, one in Federal waters and one in state waters offshore Louisiana.