The number of shares of Cimarex Energy Co. common stock outstanding as of OctoberJuly 31, 20172019 was 95,260,901.101,457,009.

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, the effectiveness of our internal control over financial reporting and our ability to remediate a material weakness in our internal control over financial reporting, 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, and availability of financing.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.

The accompanying unaudited financial statements have been prepared by 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 “Explanatory Note”, financial statements, summary of significant accounting policies, and footnotes included in our Annual Report on Form 10-K/A10-K for the year ended December 31, 2016.2018.

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 20172019 financial statement presentation.

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.

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 completion, disposal and transportation.  We have not recorded an impairment to our oil and gas well equipment and supplies during the nine months ended September 30, 2017. 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.

We use the full cost method of accounting for our oil and gas operations. Accounting rules require usAll 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.

On February 5, 2019, we entered into an Amended and Restated Credit Agreement for our senior unsecured revolving credit facility (“Credit Facility”) that matures October 16, 2020.  The Credit Facility has. Among other things, the amended and restated credit facility increased the aggregate commitments of $1.0to $1.25 billion with an option for us to increase the aggregate commitments to $1.25$1.5 billion, at any time.  There is no borrowing base subjectand extended the maturity date to the discretion of the lenders based on the value of our proved reserves under the Credit Facility.February 5, 2024. As of SeptemberJune 30, 2017,2019, 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 $997.5 million.$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 SeptemberJune 30, 2017,2019, we were in compliance with all of the financial covenants.

At SeptemberJune 30, 20172019 and December 31, 2016,2018, we had $3.6$4.6 million and $4.5$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.

On April 10, 2017,March 8, 2019, we completed a cash tender offer to purchase any of our 5.875% notes for cash consideration of $1,031.67 per $1,000 principal amount of notes, plus any accrued and unpaid interest up to, but not including, the settlement date, with $253.5issued $500 million aggregate principal amount of the notes validly tendered.  We settled these tendered notes for $268.1 million, including accrued interest.  On May 12, 2017, we completed a redemption of the 5.875% notes remaining outstanding for $1,029.38 per $1,000 principal amount of notes, plus any accrued and unpaid interest up to, but not including, the redemption date, settling the notes for $512.0 million, including accrued interest.  During the three months ended June 30, 2017, we recognized a loss on early extinguishment of debt related to these transactions of $28.2 million, composed primarily of tender and redemption premiums of $22.6 million and the write-off of $5.3 million of unamortized debt issuance costs.  The original maturity date of the 5.875% notes was May 1, 2022.

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, with15. The effective interest rate on these notes, including the first payment to be made November 15, 2017.  Along with cash on hand, we used the proceeds to fund the settlementamortization of the tendereddebt issuance costs and redeemed 5.875% notes. 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 isare governed by an indentureindentures containing certain covenants, events of default, and other restrictive provisions with which we were in compliance as of SeptemberJune 30, 2017. The effective interest rate on the 4.375% notes and the 3.90% notes, including the amortization of debt issuance costs and discount, as applicable, is 4.50% and 4.01%, respectively.2019.

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 revenuescash flow from favorable price changes.  We may enter into derivative instruments with durations of five to six quarters covering up to 50% of our oil and natural gas production on a forward eight quarter basis.  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.positions from current levels. 

As of SeptemberJune 30, 2017,2019, we have entered into oil and gas collars, oil basis swaps, oil and basis swaps.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 MidlandNYMEX (Cushing Oklahoma) price and the WTI NYMEX (Cushing Oklahoma)Midland price. For our Permian and Mid-Continent gas production, the contract prices in the PEPL and Perm EPour 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 SeptemberJune 30, 2017:2019: