Throughout this Form 10-K, we make statements that may be deemed “forward-looking” statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. In particular, in our Management’s Discussion and Analysis of Financial Condition and Results of Operations, we provide projections of our 20182020 capital expenditures. All statements, other than statements of historical facts, that address activities, events, outcomes, and other matters that Cimarex plans, expects, intends, assumes, believes, budgets, predicts, forecasts, projects, estimates, or anticipates (and other similar expressions) will, should, or may occur in the future are forward-looking statements. These forward-looking statements are based on management’s current belief, based on currently available information, as to the outcome and timing of future events. When considering forward-looking statements, you should keep in mind the risk factors and other cautionary statements in this Form 10-K. Forward-looking statements include statements with respect to, among other things:

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

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

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

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

Cimarex Energy Co., a Delaware corporation formed in 2002, is an independent oil and gas exploration and production company. Our operations are located mainly in Oklahoma,Texas, New Mexico, and Oklahoma. Currently our operations are focused in two main areas: the Permian Basin and the Mid-Continent. Our Permian Basin region encompasses west Texas and southeast New Mexico. Our Mid-Continent region consists of Oklahoma and the Texas Panhandle. On our website — www.cimarex.com — you will find our annual reports, proxy statements, and all of our Securities and Exchange Commission (“SEC”) filings.filings, which we make available free of charge. Information contained on our website is not incorporated by reference into this Annual Report. Throughout this Form 10-K we use the terms “Cimarex,” “company,” “we,” “our,” and “us” to refer to Cimarex Energy Co. and its subsidiaries.

Our principal business objective is to profitably growincrease shareholder value through the profitable long-term growth of our proved reserves and production for the long-term benefit of our shareholders 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 toso that we can reinvest in exploration and development opportunities.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-corenon-strategic assets. Key elements to our approach include:

Conservative use of leverage has long been the key to our financial strategy. We believe that low leverage coupled with strong full-cycle returns enables us to better withstand volatility in commodity prices and provide competitive returns and growth to shareholders. See Item 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities — Stock Performance Graph and Item 6 Selected Financial Data for additional financial and operating information for fiscal years 20132015 - 2017.2019.

Our December 31, 20172019 total proved reserves grew 16%5% from prior year-end. Proved undeveloped reserves as a percentage of total proved reserves decreased to 17%14% from 21%15% a year ago. We added 940.7 Bcfe119.3 MMBOE of new reserves through extensions and discoveries. Net negative revisions totaled 59.7 Bcfe,50.7 MMBOE, which consisted primarily of a decrease of 248.8 Bcfe for the removal of PUD reserves whose development will likely be delayed beyond five years of initial disclosure, offset by an increase of 187.2 Bcfe related to improved commodity prices.47.2 MMBOE in downward price revisions. The change in our proved reserves is as follows (in Bcfe):

At December 31, 2017, 52% of our total proved reserves were located in the Mid-Continent region and 48% were in the Permian Basin. The following table summarizes our estimated proved oil and gas reserves by region as of December 31, 2017.2019.

Our 20172019 production volumes totaled 1,142 MMcfe278.5 MBOE per day, a 19%25% increase from 2016,2018, and were comprised of 45%41% gas, 30%31% oil, and 25%28% NGLs. The following tables show by regiontable presents our total and average daily production volumes by region.

The following table presents the average commodity prices received and production cost per unit of production. Separate data is also included for the Cana area, which comprises the majority of the production of our largest producing field, the Watonga-Chickasha in western Oklahoma.by region.

In 2017,2019, we sold interests in various non-corenon-strategic oil and gas properties for cash proceeds of $12 million and made various oil and gas property acquisitions for $8totaling $29 million.

Cimarex has one reportable segment, exploration and production (“E&P”). Our E&P activities take place primarily in two areas: the Permian Basin and the Mid-Continent region. Almost all of our exploration and development (“E&D”) capital is allocated between these two areas.  

A summary of our 20172019 exploration and development activity by region is as follows:

The Permian Basin encompasses west Texas and southeast New Mexico. Cimarex’s Permian Basin efforts are located in the western half of the Permian Basin known as the Delaware Basin. In 2017,2019, we began infill development of our Wolfcamp shale assets in the Delaware Basin. Development was focused on drillingthe oil-rich Upper Wolfcamp shale in Culberson and Reeves Counties in Texas. The Upper Wolfcamp is being developed with horizontal wells that yielded oil and liquids-rich gas from the Wolfcamp shale and the Bone Spring formation. Cimarex saw improved results in its Wolfcamp shale wells, as measured by production and reserves, with the further implementation of long laterals and continued improvement in well completion design and in the Bone Spring wells via upsized well completions.using primarily two-mile laterals.

Our Mid-Continent region consists of Oklahoma and the Texas Panhandle. Our activity in 20172019 in the Mid-Continent was focused in the Woodford shale and the Meramec horizon, both in Oklahoma. We focused our efforts on oil development and we continued to implement largerrefine well completionscompletion and spacing in the Woodford shale and we applied those same techniques to delineate the Meramec horizon, located above the Woodford. Cimarex continues to evaluate the size and potentialthese formations.

During 2017,2019, production from the Mid-Continent averaged 508.9 MMcfe87.3 MBOE per day, or 45%31% of total company production. Total production from the region increased 11%decreased 8% in 2017 over 2016.2019 as compared to 2018. In 2017,2019, we invested $500$193 million, or 39%16% of our total E&D investment, in the Mid-Continent.

In 2017,2019, we completed or participated in the completion of 319291 gross (98.0(92.1 net) wells, of which we operated 118119 gross (77.7(85.3 net) wells. At year-end, we were in the process of drilling or participating in 2915 gross (13(5.3 net) wells and there were 9195 gross (33.7(32.4 net) wells waiting on completion.

We completed the following number of developmental wells in the years indicated in the table below. During these years, we completed no exploratory wells.

At December 31, 2017,2019, we owned an interest in 10,3739,864 gross (3,083(2,782 net) productive oil and gas wells. We had working interests in the following number of productive wells by region as of December 31, 2017:2019:

The following table sets forth the gross and net acres of both developed and undeveloped leases held by Cimarex as of December 31, 2017.2019. Gross acres are the total number of acres in which we own a working interest. Net acres are the gross acres multiplied by our working interest.

The table below summarizes by year and region our undeveloped acreage expirations in the next five years. In most cases, the drilling of a commercial well will hold the acreage beyond the expiration.

At December 31, 2017,2019, we had no proved undeveloped reserves booked on undeveloped acreage that were scheduled for development beyond the expiration dates of ourthe undeveloped acreage.

Our oil and gas production is sold under short-term arrangements at market-responsive prices. We sell our oil at prices tied directly or indirectly to field postings. Our gas is sold under price mechanisms related to either monthly or daily index prices on pipelines where we deliver our gas. We sell our NGLs at prices tied to monthly index prices where we deliver our NGLs.

We sell our oil, gas, and NGLs to a broad portfolio of customers. Ourcustomers, including major energy companies, pipeline companies, local distribution companies, and other end-users. In 2019, we made sales to two customers during 2017 were Energy Transfer Partners, L.P. and Plains All American Pipeline, L.P., whichthat each amounted to 10% or more of our consolidated revenues for 2019. Sales to those two customers accounted for 21%29% and 13%25%, respectively, of our consolidated revenues.

We regularly monitor the credit worthiness of all our customers and may require parent company guarantees, letters of credit, or prepayments when deemed necessary. Historically, losses associated with uncollectible receivables have not been significant.

Our corporate headquarters is located at 1700 Lincoln St., Suite 3700, Denver, Colorado 80203. On December 31, 20172019 and 2016,2018, Cimarex had 910987 and 856955 employees, respectively. None of our employees are subject to collective bargaining agreements.

The oil and gas industry is highly competitive, particularly for prospective undeveloped leases and purchases of proved reserves. There is also competition for rigs and related equipment used to drill for and produce oil and gas, however, to a lesser extent in the current market environment. Our competitive position also is highly dependent on our ability to recruit and retain geological, geophysical, and engineering expertise. We compete for prospects, proved reserves, oil-field services, and qualified oil and gas professionals with major and diversified energy companies and other independent operators that have larger financial, human, and technological resources than we do.

We compete with integrated, independent, and other energy companies for the sale and transportation of our oil, gas, and NGLs to marketing companies and end users. The oil and gas industry competes with other energy industries that supply fuel and power to industrial, commercial, and residential consumers. Many of these competitors have greater financial and human resources.resources than we do. The effect of these competitive factors cannot be predicted.

Proved oil and gas reserve quantities are based on estimates prepared by Cimarex in accordance with the SEC’s rules for reporting oil and gas reserves. Our reserve definitions conform with definitions of Rule 4-10(a) (1)-(32) of Regulation S-X of the SEC. All of our reserve estimates are maintained by our internal Corporate Reservoir Engineering group, which is comprised of reservoir engineers and engineering technicians. The objectives and management of this group are separate from and independent of the exploration and production functions of the company. The primary objective of our Corporate Reservoir Engineering group is to maintain accurate forecasts on all properties of the company through ongoing monitoring and timely updates of operating and economic parameters (production forecasts, prices and regional differentials, operating expenses, ownership, etc.) in accordance with guidelines established by the SEC. This separation of function and responsibility is a key internal control.

Cimarex engineers are responsible for estimates of proved reserves. Corporate engineers interact with the exploration and production departments to ensure all available engineering and geologic data is taken into account prior to establishing or revising an estimate. After preparing the reserves update, the corporate engineers review their recommendations with the Vice President of Corporate Engineering. After approval from the Vice President of Corporate Engineering, the revisions are entered into our reserves database by the engineering technician.

During the course of the year, the Vice President of Corporate Engineering presents summary reserves information to senior management and to our Board of Directors for their review. From time to time, the Vice President of Corporate Engineering also will confer with the Vice President of Exploration, Chief Operating Officer, and the Chief Executive Officer regarding specific reserves-related issues. In addition, Corporate Reservoir Engineering maintains a set of basic guidelines and procedures to ensure that critical checks and reviews of the reserves database are performed on a regular basis.

Together, these internal controls are designed to promote a comprehensive, objective, and accurate reserves estimation process. As an additional confirmation of the reasonableness of our internal estimates, DeGolyer and MacNaughton, an independent petroleum engineering consulting firm, reviewedperformed an independent evaluation of our estimated net reserves associated withrepresenting greater than 80% of the total future net revenue discounted at 10% attributable to the total interests owned by Cimarex as of December 31, 2017.2019. The individual primarily responsible for overseeing the review is a Senior Vice President with DeGolyer and MacNaughton and a Registered Professional Engineer in the State of Texas with over 3335 years of experience in oil and gas reservoir studies and reserves evaluations.

The technical employee primarily responsible for overseeing the oil and gas reserves estimation process is Cimarex’s Vice President of Corporate Engineering. This individual graduated from the Colorado School of Mines with a Bachelor of Science degree in Engineering and has more than 2325 years of practical experience in oil and gas reservoir evaluation. He has been directly involved in the annual reserves reporting process of Cimarex since 2002 and has served in his current role for the past 1315 years.

We undertake title examination and perform curative work at the time we lease undeveloped acreage, prepare for the drilling of a prospect, or acquire proved properties. We believe title to our properties is good and defensible, and is in accordance with industry standards. Nevertheless, we are involved in title disputes from time to time that result in litigation. Our oil and gas properties are subject to customary royalty interests, liens incidental to operating agreements, tax liens, and other burdens and minor encumbrances, easements, and restrictions.

Oil and gas production and transportation is subject to extensive federal, state, and local laws and regulations. Compliance with existing laws often is difficult and costly, but has not had a significant adverse effect on our operations or financial condition. In recent years, we have been most directly impacted by federal and state environmental regulations and energy conservation rules. We are also impacted by federal and state regulation of pipelines and other oil and gas transportation systems.

The states in which we conduct operations establish requirements for drilling permits, the method of developing fields, the size of well spacing units, drilling density within productive formations and the unitization or pooling of properties. In addition, state conservation laws include requirements for waste prevention, establish limits on the maximum rate of production from wells, generally prohibit the venting or flaring of natural gas, and impose certain requirements regarding the ratability of production.

Cimarex is committed to environmental protection and believes we are in material compliance with applicable environmental laws and regulations. We obtain permits for our facilities and operations in accordance with the applicable laws and regulations. There are no known issues that have a significant adverse effect on the permitting process or permit compliance status of any of our facilities or operations. Expenditures are required to comply with environmental regulations. These costs are a normal, recurring expense of operations and not an extraordinary cost of compliance with current government regulations.

We do not anticipate that we will be required under current environmental laws and regulations to expend amounts that will have a material adverse effect on our financial position or operations. However, due to continuing changes in these laws and regulations, we are unable to predict with any reasonable degree of certainty any potential delays in development plans that could arise, or our future costs of complying with governmental requirements. We maintain levels of insurance customary in the industry to limit our financial exposure in the event of a substantial environmental claim resulting from sudden, unanticipated and accidental discharges of oil, produced water, or other substances as well as additional coverage for certain other pollution events.

Under the Natural Gas Policy Act (“NGPA”), natural gas gathering facilities are expressly exempt from FERC jurisdiction. What constitutes “gathering” under the NGPA has evolved through FERC decisions and judicial review of such decisions. We believe that our gathering systems meet the test for non-jurisdictional “gathering” systems under the NGPA and that our facilities are not subject to federal regulations. Although exempt from FERC oversight, our natural gas gathering systems and services may receive regulatory scrutiny by state and federal agencies regarding the safety and operating aspects of the transportation and storage activities of these facilities.

In addition to using our own gathering facilities, we may use third-party gathering services or interstate transmission facilities (owned and operated by interstate pipelines) to ship our gas to markets.

Additional proposals and proceedings that might affect the oil and gas industry are pending before the U.S. Congress, FERC, Bureau of Land Management (“BLM”), U.S. Environmental Protection Agency (“EPA”), state legislatures, state agencies, local governments, and the courts. We cannot predict when or whether any such proposals may become effective and what effect they will have on our operations. We do not anticipate that compliance with existing federal, state, and local laws, rules, or regulations will have a material adverse effect upon our capital expenditures, earnings, or competitive position.

Cimarex and the petroleum industry in general are affected by both federal and state income tax laws, as well as other local tax regulations involving ad valorem, personal property, franchise, severance, and other excise taxes. We have considered the effects of these provisions on our operations and do not anticipate that therethey will because any material undisclosed impact on our capital expenditures, earnings, or competitive position.

See Part III, Item 10, Directors, Executive Officers and Corporate Governance for information regarding our executive officers as of February 23, 2018.26, 2020.

The following risks and uncertainties, together with other information set forth in this Form 10-K, should be carefully considered by current and future investors in our securities. These risks and uncertainties are not the only ones we face. Additional risks and uncertainties presently unknown to us or currently deemed immaterial also may impair our business operations. The occurrence of one or more of these risks or uncertainties could materially and adversely affect our business, financial condition, and results of operations, which in turn could negatively impact the value of our securities.

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.

Accounting rules require that we periodically review the carrying value of our oil and gas properties and goodwill for possible impairment.

In 2016 and 2015,2019, we recognized a ceiling test impairments totaling $757.7 million ($481.4 million, netimpairment of tax) and $4.03 billion ($2.56 billion, net of tax), respectively.$618.7 million. The impairmentsimpairment resulted primarily from the impact of decreases in the trailing twelve-month average prices for oil, gas, and NGLs utilized in determining the estimated future net cash flows from proved reserves. At December 31,We did not recognize any ceiling test impairments in 2018 or 2017 because the calculated value of the ceiling limitation exceeded the carrying value of our oil and gas properties subject to the test, and no impairment was necessary. However, a decline of approximately 19% or more in the value of the ceiling limitation would have resulted in an impairment.test. Because the ceiling calculation uses trailing twelve-month average commodity prices, the effect of increases and decreases in period-over-period prices can significantly impact the ceiling limitation calculation. Impairment charges do not affect cash flow from operating activities, but do adversely affect our net income and various components of our balance sheet.

Our internal control over financial reporting may not prevent or detect misstatements because of its inherent limitations, including the possibility of human error, the circumvention or overriding of controls, or fraud. Even effective internal controls can provide only reasonable assurance with respect to the preparation and fair presentation of financial statements. If we fail to maintain the adequacy of our internal controls, including any failure to implement required new or improved controls, or if we experience difficulties in their implementation, our business and financial results could be harmed and we could fail to meet our financial reporting obligations. For example, at December 31, 2016, management concluded that a deficiency in the design of our internal controls related to the full cost ceiling test calculation represented a material weakness in our internal control over financial reporting and, therefore, that we did not maintain effective internal control over financial reporting as of December 31, 2016, as reported in our Form 10-K/A for that period. We have since remediated this material weakness, however, there is no guaranteeweakness. However, in connection with the preparation of this Form 10-K, management evaluated the effectiveness of our internal control over financial reporting as of December 31, 2019 and concluded that we won’t experiencedid not have an effective process and control in place to periodically evaluate the quantitative effect associated with the inclusion or exclusion of certain inputs, such as skim oil and drip liquids, in the Company’s oil and gas reserve database used in the ceiling test impairment calculations, depletion calculations, and the preparation of the related disclosures included in the supplemental information on oil and gas producing activities (unaudited), which represents a material weaknessesweakness in our internal control over financial reporting in the future orand, therefore, that we will be able to implementdid not maintain effective internal control over financial reporting as of December 31, 2019. For a description of the material weakness identified by management and the remediation efforts being implemented for that material weakness, see “Part II, Item 9A — Controls and Procedures.” If the new controls implemented to address suchthe material weaknesses as necessary, whichweakness and to strengthen the overall internal control related to the reserve reporting process are not designed or do not operate effectively, if we are unsuccessful in implementing or following these new controls, or we are otherwise unable to remediate this material weakness, this may result in untimely or inaccurate reporting of our financial statements.

A credit crisis or other turmoil in the U.S. or global financial system may have a negative impact on our business and our financial condition. Our ability to access the capital markets may be restricted at a time when we would like, or need, to raise financing. This could have an impact on our flexibility to react to changing economic and

In order to replace the reserves depleted by production and to maintain or increase our total proved reserves and overall production levels, we must either locate and develop new oil and gas reserves or acquire producing propertiesproved reserves from others. This requires significant capital expenditures and can impose reinvestment risk for us, as we may not be able to continue to replace our reserves economically. While we occasionally may seek to acquire proved reserves, our main business strategy is to grow through exploration and drilling. Without successful exploration and development, our reserves, production, and revenues could decline rapidly, which would negatively impact the results of our operations.

Exploration and development involves numerous risks, including new governmental regulations and the risk that we will not discover any commercially productive oil or gas reservoirs. Additionally, it can be unprofitable, not only from drilling dry holes but also from drilling productive wells that do not return a profit because of insufficient reserves or declines in commodity prices.

Our drilling operations may be curtailed, delayed, or canceled for many reasons. Factors such as unforeseen poor drilling conditions, title problems, unexpected pressure irregularities, equipment failures, accidents, adverse weather conditions, compliance with environmental and other governmental requirements, bans, moratoria, or other restrictions implemented by local governments and the cost of, or shortages or delays in the availability of, drilling and completion services could negatively impact our drilling operations.