Morningstar®

 Document ResearchSM

 

FORM10-K

CIMAREX ENERGY CO - XEC

Filed: February 26, 2013 (period: December 31, 2012)

Annual report with a comprehensive overview of the company

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user

assumes all risks for any damages or losses arising from any use of this information, except to the extent such damages or losses cannot be

limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Use these links to rapidly review the document

TABLE OF CONTENTS DESCRIPTION

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

PART IV

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D C 20549

Form 10-K

Commission file number 001-31446

CIMAREX ENERGY CO.

(Exact name of registrant as specified in its charter)

1700 Lincoln Street, Suite 1800, Denver, Colorado 80203

(Address of principal executive offices including ZIP code)

(303) 295-3995

(Registrant's telephone number)

 Securities Registered Pursuant to Section 12(b) of the Act:

 Securities Registered Pursuant to Section 12(g) of the Act: None

 Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO o

 Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. YES o NO 

(Mark

One)

 ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT

OF 1934

For the fiscal year ended December 31, 2012

OR

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE

ACT OF 1934

Delaware 45-0466694

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

Title of Each Class Name of each exchange on which registered

Common Stock ($0.01 par value) New York Stock Exchange

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
 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 o

 Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File

required to be submitted and posted 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 and post such files). YES  NO o

 Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained,

to the best of the registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any

amendment to this Form 10-K. o

 Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting

company. See the definitions of "large accelerated filer," "accelerated filer," and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

 Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). YES o NO 

 Aggregate market value of the voting stock held by non-affiliates of Cimarex Energy Co. as of June 30, 2012 was approximately $4.6 billion.

 Number of shares of Cimarex Energy Co. common stock outstanding as of February 15, 2013 was 86,406,418. Documents Incorporated by

Reference: Portions of the Registrant's Proxy Statement for its 2013 Annual Meeting of Stockholders are incorporated by reference into Part III of this

Form 10-K.

Large accelerated filer  Accelerated filer o Non-accelerated filer o

(Do not check if a

smaller reporting company)

Smaller reporting company o

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

TABLE OF CONTENTS

DESCRIPTION 

2

Item Page

Glossary 3

Part I

1. Business 5

1A. Risk Factors 12

1B. Unresolved Staff Comments 20

2. Properties 20

3. Legal Proceedings 25

4. Mine Safety Disclosures 25

4A. Executive officers 25

Part II

5. Market for the Registrant's Common Equity and Related Stockholder Matters 27

5C. Stock Repurchases 28

6. Selected Financial Data 29

7. Management's Discussion and Analysis of Results of Operations and Financial Condition 29

7A. Qualitative and Quantitative Disclosures about Market Risk 57

8. Financial Statements and Supplementary Data 58

9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure 93

9A. Controls and Procedures 93

9B. Other Information 95

Part III

10. Directors and Executive officers of Cimarex 96

11. Executive Compensation 96

12. Security Ownership of Certain Beneficial Owners and Management 96

13. Certain Relationships and Related Transactions 96

14. Principal Accountant Fees and Services 96

Part IV

15. Exhibits and Financial Statement Schedules 97

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

GLOSSARY

 Bbl/d—Barrels (of oil or natural gas liquids) per day

 Bbls—Barrels (of oil or natural gas liquids)

 Bcf—Billion cubic feet

 Bcfe—Billion cubic feet equivalent

 Btu—British thermal unit

 MBbls—Thousand barrels

 Mcf—Thousand cubic feet (of natural gas)

 Mcfe—Thousand cubic feet equivalent

 MMBbls—Million barrels

 MMBtu—Million British thermal units

 MMcf—Million cubic feet

 MMcf/d—Million cubic feet per day

 MMcfe—Million cubic feet equivalent

 MMcfe/d—Million cubic feet equivalent per day

 Net Acres—Gross acreage multiplied by working interest percentage

 Net Production—Gross production multiplied by net revenue interest

 NGL or NGLs—Natural gas liquids

 Tcf—Trillion cubic feet

 Tcfe—Trillion cubic feet equivalent

One barrel of oil or NGL is the energy equivalent of six Mcf of natural gas

3

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

PART I 

Forward-Looking Statements

 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. 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:

• Amount, nature and timing of capital expenditures; 

• Drilling of wells; 

• Reserve estimates; 

• Timing and amount of future production of oil and natural gas; 

• Operating costs and other expenses; 

• Cash flow and anticipated liquidity; 

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

• Marketing of oil and natural gas; 

• Legislation and regulatory changes; 

• Access to capital markets.

 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 and gas. These risks include, but are not limited to, commodity price

volatility, inflation, lack of availability of goods and services, environmental risks, drilling and other operating risks, regulatory changes, the uncertainty

inherent in estimating proved oil and natural gas reserves and in projecting future rates of production and timing of development expenditures and other

risks described herein.

 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.

4

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 1. BUSINESS 

General

 Cimarex Energy Co., a Delaware corporation formed in 2002, is an independent oil and gas exploration and production company. Our operations

are mainly located in Oklahoma, Texas, New Mexico and Kansas. Our website address is www.cimarex.com. There you will find our news releases,

annual reports, proxy statements, 10-Ks, 10-Qs, 8-Ks, insider (Section 16) filings and all other Securities and Exchange Commission (SEC) filings. We

have also posted our Code of Ethics, Code of Business Conduct, Corporate Governance Guidelines, Audit Committee Charter and Compensation and

Governance Committee Charter. Copies of these documents are available in print upon a written or telephonic request to our Corporate Secretary.

Throughout this Form 10-K we use the terms "Cimarex," "company," "we," "our," and "us" to refer to Cimarex Energy Co. and its subsidiaries.

 Proved oil and gas reserves as of year-end 2012 totaled 2.3 Tcfe, consisting of 1.3 Tcf of gas and 168 million barrels of oil and natural gas liquids

(liquids). Of total proved reserves, 45% are liquids and 80% are classified as proved developed.

 Our 2012 production averaged 626.5 MMcfe/d, comprised of 323.8 MMcf of gas and 50,457 barrels of liquids. The wells we operate account for

68% of total proved reserves and approximately 80% of production.

 Our corporate headquarters are located at 1700 Lincoln Street, Suite 1800, Denver, Colorado 80203. and our main telephone number at that

location is (303) 295-3995.

2012 Summary Highlights

 During 2012 we accomplished the following:

• grew production 6% to a record 626.5 MMcfe/d; combined Permian Basin and Mid-Continent production increased 20% to an all-time

high of 586 MMcfe/d; 

•

increased proved reserves 10% to 2.3 Tcfe; adjusted for property sales, reserves increased 13%; 

• added 757 Bcfe of proved reserves from extensions and discoveries replacing 330% of production; 

•

realized net income of $353.8 million, or $4.07 per diluted share; 

• generated cash flow from operating activities of $1.2 billion; 

• sold $306 million of non-strategic assets which will be reinvested in core area exploration and development activities; 

• evaluated, de-risked and expanded our acreage position in several key long-term future drilling projects; 

• ended the year with debt to total capitalization of 18%.

Business Strategy

 Our principal business objective is to profitably grow proved reserves and production for the long-term benefit of our shareholders through a

diversified drilling portfolio. Our strategy centers on maximizing cash flow from producing properties and profitably reinvesting that cash flow in

exploration and development. While our primary focus is drilling, we occasionally consider acquisition and merger opportunities that allow us to either

enhance our competitive position in existing core areas or to add new areas. Key elements to our approach include:

• generating and maintaining a diversified portfolio of drilling opportunities, with varying geologic characteristics, in different geographic

areas and commodity type exposure;

5

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

• detailed evaluation of drilling decisions based on risk-adjusted discounted cash flow rate of return on investment; 

•

tracking predicted and actual results in a centralized exploration management system which provides feedback to improve results; 

• attracting quality employees and maintaining integrated teams of geoscientists, landmen and engineers; 

• maximizing profitability by efficiently operating our properties; and 

• maintaining a strong financial structure.

 We believe that detailed technical analysis, operational focus and a disciplined capital investment process mitigates risk and positions us to continue

to achieve profitable increases in proved reserves and production. Further, our diversified portfolio and limited long-term capital commitments provide

the flexibility to respond quickly to industry volatility.

 Our drilling portfolio is principally split between the Permian Basin and Mid-Continent regions. Exploration and development (E&D) capital

expenditures for 2012 totaled $1.6 billion. Of total expenditures, 55% were invested in the Permian Basin and 41% in the Mid-Continent area. Our

Permian Basin efforts are focused on horizontal oil and liquids-rich gas drilling, where the Bone Spring oil formation both in Texas and New Mexico

has been one of our most economic investments areas. In the Mid-Continent, our activity has been focused in the liquids-rich gas portion of the CanaWoodford shale. With oil prices relatively stronger than gas prices, we shifted essentially all of our capital to oil and liquids-rich gas drilling in 2012.

 Conservative use of leverage has long been a part of our financial strategy. We believe that maintaining a strong balance sheet mitigates financial

risk and enables us to withstand low prices. At year-end 2012, we had $750 million of long-term debt and debt to total capitalization was 18%.

2013 Outlook

 Our 2013 E&D capital investment is presently expected to be in the range of $1.4-1.5 billion. We expect nearly all of our 2013 capital to be

directed towards oil and liquids-rich gas drilling in the Permian Basin and Cana-Woodford shale play.

 Total company production volumes are projected to average 675-705 MMcfe/d in 2013, an increase of 8-13%. Liquids are projected to account for

51% of total equivalent production, up from 48% in 2012. Combined Mid-Continent and Permian 2013 production volumes are projected to grow 11-

15%, averaging between 652-673 MMcfe/d. Gulf Coast volumes are projected to average 23-32 MMcfe/d, or 4% of total estimated company volumes.

 As has been our historical practice, we regularly review capital expenditures throughout the year and will adjust our investments based on changes

in commodity prices, service costs and drilling success. We have the flexibility to adjust our capital expenditures based upon market conditions.

Business Segments

 Cimarex has one reportable segment (exploration and production).

Exploration and Production Overview

 Our exploration and production (E&P) activities have been conducted primarily in two main areas: the Permian Basin and the Mid-Continent

region. The Permian Basin encompasses west Texas and southeast New Mexico. The Mid-Continent region consists of Oklahoma, the Texas

Panhandle and southwest Kansas. Our Gulf Coast operations are conducted in southeast Texas.

6

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 A summary of our 2012 exploration and development activity by region is as follows.

Permian Basin

 Our Permian Basin operations cover west Texas and southeast New Mexico. Drilling principally occurred in the Delaware Basin portion of New

Mexico and West Texas, mainly targeting the Bone Spring and Wolfcamp formations. In total, we drilled 182 gross (122 net) wells in this area during

2012 completing 171 gross (113 net) as producers. Full-year 2012 investment in this area totaled $889 million, or 55% of total capital.

 Cimarex drilled and completed 64 gross (34 net) New Mexico Bone Spring wells in 2012. Per-well 30-day gross production from these wells

averaged over 640 Boe/d (90% oil). Texas Third Bone Spring drilling totaled 43 gross (26 net) wells, which had per-well 30-day average gross

production rates of over 1,000 Boe/d (85% oil).

 We are also evaluating multiple shale intervals in the Delaware Basin, including the Wolfcamp, Avalon and Cisco/Canyon formations. The

majority of drilling to date has been in the Wolfcamp. The Wolfcamp formation is a shale interval that varies in thickness from 600-700 feet at depths of

8,000-10,000 feet throughout our acreage.

 We drilled and completed 15 gross (14 net) horizontal Wolfcamp shale wells in southern Eddy County, New Mexico and Culberson County,

Texas, in 2012. Since commencing the play in 2010, we have drilled a total of 33 gross (31 net) Wolfcamp wells. Thirty-day average initial production

on these wells was 6.4 MMcfe/d, comprised of 44% gas, 26% oil and 30% NGL. We have over 100,000 net acres prospective for the Wolfcamp in this

area.

Mid-Continent

 Our Mid-Continent region encompasses operations in Oklahoma, southwest Kansas and the Texas Panhandle. We drilled 167 gross (69 net) MidContinent wells during 2012, completing 98% as producers. The bulk of this drilling activity was in the Anadarko Basin of western Oklahoma, where

we drilled 149 gross (61 net) wells which were primarily infill development wells. At year-end there were 46 gross (21 net) wells waiting on

completion. Full-year 2012 investment in this area was $673 million, or 41% of total E&D capital.

 In the Anadarko Basin of western Oklahoma, our largest investment was in the Cana-Woodford shale play. The Cana-Woodford formation is a

shale interval that varies in thickness from 120-280 feet at depths of 11,000-16,000 feet throughout our acreage. We have approximately 141,000 net

acres in the play.

Gulf Coast

 Our Gulf Coast region is focused on exploration in southeast Texas. This effort is generally characterized by reliance on three-dimensional (3-D)

seismic information for prospect generation. Compared to other core areas, we often experience larger potential reserves per well, greater drilling depths

and lower success rates in the Gulf Coast. During 2012, several new seismic shoots were being obtained and processed and drilling was limited. Fullyear 2012 investment in the Gulf Coast area was $46 million, or 3% of total E&D capital. We drilled 3 gross (1 net) Gulf Coast wells in 2012, realizing

a 33% success rate.

7

Exploration

and

Development

Capital

Gross

Wells

Drilled

Net

Wells

Drilled

Completion

Rate

12/31/12

Proved

Reserves

(in millions) (Bcfe)

Permian Basin $ 889 182 122 94% 697

Mid-Continent 673 167 69 98% 1,528

Gulf Coast/Other 61 3 1 33% 34

$ 1,623 352 192 95% 2,259

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Production, Pricing and Production Cost Information

 The following tables set forth certain information regarding the company's production volumes by region, the average commodity prices received

and production cost per unit of production (Mcfe). This data is also included for our Cana-Woodford project which is part of our Mid-Continent region.

In 2012, proved reserves of Cana-Woodford were approximately 50% of the company's total proved reserves. No other field had reserves in excess of

15% of our total proved reserves.

8

Production Volumes Net Average Daily Volumes

Years Ending December 31,

Gas

(MMcf)

Oil

(MBbls)

NGL

(MBbls)

Equivalent

(MMcfe)

Gas

(MMcf)

Oil

(MBbls)

NGL

(MBbls)

Equivalent

(MMcfe)

2012

Permian Basin 29,135 8,750 2,480 96,517 79.6 23.9 6.8 263.7

Mid-Continent 80,998 2,210 3,962 118,029 221.3 6.1 10.8 322.5

Gulf Coast/Other 8,362 556 510 14,754 22.9 1.5 1.4 40.3

Total company 118,495 11,516 6,952 229,300 323.8 31.5 19.0 626.5

Cana-Woodford 43,222 898 2,830 65,593 118.1 2.5 7.7 179.2

2011

Permian Basin 26,848 6,121 1,228 70,944 73.6 16.8 3.4 194.4

Mid-Continent 74,078 2,078 3,378 106,811 203.0 5.7 9.3 292.6

Gulf Coast/Other 19,187 1,579 1,630 38,443 52.5 4.3 4.4 105.3

Total company 120,113 9,778 6,236 216,198 329.1 26.8 17.1 592.3

Cana-Woodford 30,187 630 2,194 47,130 82.7 1.7 6.0 129.1

2010

Permian Basin 26,104 5,097 615 60,374 71.5 14.0 1.7 165.4

Mid-Continent 70,865 1,708 2,014 93,198 194.1 4.7 5.5 255.4

Gulf Coast/Other 35,844 3,039 1,643 63,937 98.3 8.3 4.5 175.1

Total company 132,813 9,844 4,272 217,509 363.9 27.0 11.7 595.9

Cana-Woodford 18,669 358 1,480 29,697 51.1 1.0 4.1 81.4

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Our largest producing area is the Mid-Continent region. During 2012, Mid-Continent production averaged 322.5 MMcfe/d, or 51% of total

production. Infill development drilling activity in the Cana-Woodford shale play resulted in Mid-Continent production increasing 10% in 2012.

 The Permian Basin contributed 263.7 MMcfe/d in 2012, which was 42% of our total production. It was our most active drilling area in 2012 as

higher oil prices led to strong returns on investment. Most of the activity was focused in the Bone Spring and Wolfcamp formations. Oil production

was a record 23,908 Bbl/d, a 43% increase over 2011.

 Gulf Coast production averaged 40.3 MMcfe/d during 2012, a 62% decrease from 2011. These volumes represented 6% of total production. Gulf

Coast volumes can fluctuate significantly depending on timing of exploration success relative to natural production declines.

Acquisitions and Divestitures

 Over the last two years we made property acquisitions totaling approximately $78.9 million. We bought $33.5 million of properties in 2012, the

largest of which was a $21 million purchase of properties in Culberson County, Texas. In 2011, we acquired additional oil and gas properties for a total

of $45.4 million of which $42.2 million was in our Cana-Woodford shale play.

 We regularly evaluate our asset base for potential divestiture. Over the last two years we sold $535 million of properties. In 2012, we sold

$306 million of properties, the most significant of which was the year-end sale of $294 million of non-core assets in Texas. These properties had

production of approximately 2,550 Boe/d (75% oil) and proved reserves of 9.1 million barrels.

 In August 2011, we sold all of our interests in Sublette County, Wyoming for $195.5 million. These assets principally consisted of a gas

processing plant under construction and 210 Bcf of proved undeveloped gas reserves. In 2011, we also sold interests in certain other non-strategic oil

and gas properties with proved reserves of 16.3 Bcfe for $33.3 million, including assets located in south Texas and southeast New Mexico.

9

Avearge Sales Price Production

Gas Cost

(per MCF)

Oil

(per Bbl)

NGL

Year Ending December 31, (per Bbl) (per Mcfe)

2012

Permian Basin $ 2.93 $ 87.93 $ 30.78 $ 1.50

Mid-Continent $ 2.86 $ 90.41 $ 29.91 $ 0.77

Gulf Coast/Other $ 2.88 $ 105.37 $ 35.95 $ 1.55

Total company $ 2.88 $ 89.25 $ 30.66 $ 1.13

Cana-Woodford $ 2.69 $ 90.64 $ 29.67 $ 0.25

2011

Permian Basin $ 4.94 $ 90.81 $ 44.70 $ 1.88

Mid-Continent $ 4.26 $ 91.62 $ 38.73 $ 0.80

Gulf Coast/Other $ 4.27 $ 103.31 $ 47.91 $ 0.79

Total company $ 4.42 $ 93.00 $ 42.31 $ 1.14

Cana-Woodford $ 3.92 $ 91.71 $ 38.38 $ 0.18

2010

Permian Basin $ 5.01 $ 76.10 $ 33.36 $ 1.53

Mid-Continent $ 4.71 $ 75.54 $ 33.68 $ 0.73

Gulf Coast/Other $ 5.27 $ 78.55 $ 37.00 $ 0.56

Total company $ 4.92 $ 76.76 $ 34.91 $ 0.89

Cana-Woodford $ 4.34 $ 76.76 $ 33.84 $ 0.10

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Marketing

 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 pricing mechanisms related to either monthly index prices on pipelines where we deliver our gas or the daily spot

market.

 We sell our oil and gas to a broad portfolio of customers. Our major customers during 2012 were Sunoco Logistics Partners L.P. (Sunoco) and

Enterprise Products Partners L.P. (Enterprise) and accounted for 22% and 21% of our consolidated revenues in 2012, respectively. Sunoco is a

significant purchaser of our oil in New Mexico and Beaumont, Texas areas. Enterprise is our primary oil purchaser in Oklahoma and Ward/Culberson

Counties in Texas. We regularly monitor the credit worthiness of all our customers and may require parental guarantees, letters of credit or prepayments

when deemed necessary.

Employees

 Cimarex employed 851 people on December 31, 2012. None of our employees are subject to collective bargaining agreements.

Competition

 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. Our competitive position is also 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 and gas 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. The effect of these competitive factors cannot be predicted.

Title to Oil and Gas Properties

 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 which 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.

Government Regulation

 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 new 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.

10

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Environmental Regulation. Various federal, state and local laws regulating the discharge of materials into the environment, or otherwise relating

to the protection of the environment, directly impact oil and gas exploration, development and production operations, which consequently impact our

operations and costs. These laws and regulations govern, among other things, emissions to the atmosphere, discharges of pollutants into waters,

underground injection of waste water, the generation, storage, transportation and disposal of waste materials, and protection of public health, natural

resources and wildlife. These laws and regulations may impose substantial liabilities for noncompliance and for any contamination resulting from our

operations and may require the suspension or cessation of operations in affected areas.

 Cimarex is committed to environmental protection and believes we are in 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 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 these 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.

 Gas Gathering and Transportation. The Federal Energy Regulatory Commission (FERC) requires interstate gas pipelines to provide open

access transportation. FERC also enforces the prohibition of market manipulation by any entity, and the facilitation of the sale or transportation of

natural gas in interstate commerce. Interstate pipelines have implemented these requirements, providing us with additional market access and more fairly

applied transportation services and rates. FERC continues to review and modify its open access and other regulations applicable to interstate pipelines.

 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, state legislatures,

state agencies 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.

Federal and State Income and Other Local Taxation

 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

11

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

anticipate that there will be any undisclosed impact on our capital expenditures, earnings or competitive position.

ITEM 1A. RISK FACTORS 

 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 not presently known to

us or that we currently deem immaterial may also impair our business operations. The occurrence of one or more of these risks or uncertainties could

materially and adversely affect our business, our financial condition, and the results of our operations, which in turn could negatively impact the value of

our securities.

Oil, gas, and NGL prices fluctuate due to a number of uncontrollable factors, 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 very 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 global supply and demand for oil and gas, geopolitical instability, the actions of the Organization of Petroleum

Exporting Countries, the level of global oil and gas exploration and production activity, weather conditions, technological advances affecting energy

consumption, governmental regulations and taxes, and advancement of alternative fuels.

 Our proved oil and gas reserves and production volumes will decrease in quantity unless we successfully replace the reserves we produce 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. Low prices reduce 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, our ability to borrow under our bank credit facility and to raise additional debt or equity capital to fund

acquisitions may also be impacted.

If prices decrease, we may be required to take write-downs of the carrying values of our oil and gas properties and/or our goodwill.

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

moderate price declines in the future could cause us to incur impairment charges in the future, which could have a material adverse effect on our results

of operations in the period taken.

 As of December 31, 2012, 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, the amount of the excess has declined approximately 87% since December 31, 2011. As of December 31,

2012, a decline of 3% or more in the value of the ceiling limitation would have resulted in an impairment. If negative trends continue, we may incur

impairment charges in the future, which could have a material adverse effect on our financial results.

Global financial markets may impact our business and financial condition.

 Recurrence of a credit crisis or other turmoil in the global financial system may have an 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

12

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

changing economic and business conditions. Deteriorating economic conditions could have an impact on our lenders, purchasers of our oil and gas

production and working interest owners in properties we operate, causing them to fail to meet their obligations to us.

Failure to economically replace commercial quantities of new oil and gas reserves could negatively affect our financial results and future rate of

growth.

 In order to replace the reserves depleted by production and to maintain or grow our total proved reserves and overall production levels, we must

locate and develop new oil and gas reserves both in existing as well as new areas of development or acquire producing properties from others. This can

require significant capital expenditures and can impose reinvestment risk for our company, as we may not be able to continue to replace our reserves

economically. While we may from time to time seek to acquire proved reserves, our main business strategy is to grow through drilling. Without

successful exploration and development, our reserves, production and revenues could decline rapidly, which would negatively impact our results of

operations.

 Exploration and development involves numerous risks, including new regulations or legislation and the risk that no commercially productive oil or

gas reservoirs will be discovered. It can also be unprofitable, not only from dry wells, but also from productive wells that do not produce sufficient

reserves to return a profit or from declines in commodity prices.

 Our drilling operations may be curtailed, delayed or canceled as a result of several factors, including unforeseen poor drilling conditions, title

problems, unexpected pressure or irregularities in formations. In addition, equipment failures, accidents, adverse weather conditions, compliance with

environmental and other governmental requirements, and the cost of, or shortages or delays in the availability of, drilling and completion services may

also negatively impact our drilling operations.

Our proved reserve estimates may be inaccurate and future net cash flows are uncertain.

 Estimates of total proved oil and gas reserves (consisting of proved developed and proved undeveloped reserves) and associated future net cash

flow depend on a number of variables and assumptions. See Forward-Looking Statement in this report. Among others, changes in any of the following

factors may cause actual results to vary considerably from estimates:

•

timing of development expenditures; 

• amount of required capital expenditures and associated economics; 

•

recovery efficiencies, decline rates, drainage areas, and reservoir limits; 

• anticipated reservoir and production characteristics; and interpretations of geologic and geophysical data; 

• production rates, reservoir pressure, unexpected water encroachment, and other subsurface conditions; 

•

future oil, gas and NGL prices; 

• effects of governmental regulation; 

•

future operating costs; 

•

future property, severance, excise and other taxes incidental to oil and gas operations; 

• workover and remediation costs; and 

• Federal and state income taxes.

13

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 At December 31, 2012, 20% of our total proved reserves are categorized as proved undeveloped. All of these proved undeveloped reserves are in

the Cana-Woodford shale play.

 Our proved oil and gas reserve estimates are prepared by Cimarex engineers in accordance with guidelines established by the SEC. DeGolyer and

MacNaughton, independent petroleum engineers, reviewed our reserve estimates for properties that comprised at least 80% of the discounted future net

cash flows before income taxes, using a 10% discount rate, as of December 31, 2012.

 The cash flow amounts referred to in this report should not be construed as the current market value of our proved reserves. In accordance with

SEC guidelines, the estimated discounted net cash flow from proved reserves is based on the unweighted average of the previous twelve months' first

day of the month prices and current costs as of the date of the estimate, whereas actual future prices and costs may be materially different.

Hedging transactions may limit our potential gains and involve other risks.

 To manage our exposure to price risk, we enter hedging agreements from time to time. We use commodity derivatives with respect to a significant

portion of our future production. For 2013, we have hedged approximately 35% of our anticipated oil production. The goal of these hedges is to lock in

prices so as to limit volatility and increase the predictability of cash flow. These transactions limit our potential gains if oil and gas prices rise above the

price established by the hedges.

 In certain circumstances, hedging transactions may expose us to the risk of financial loss, including instances in which:

•

the counterparties to our futures contracts fail to perform under the contracts; 

• a sudden unexpected event materially impacts oil and natural gas prices; 

• our production is less than expected; or 

•

there is a widening of price basis differentials between delivery points for our production and the delivery point assumed in the hedge

arrangement.

 Because all of our derivative contracts are accounted for under mark-to-market accounting, we expect continued volatility in derivative gains or

losses on our income statement as changes occur in the relevant price indexes.

The adoption of derivatives legislation could have an adverse effect on our ability to use derivative instruments as hedges against fluctuating

commodity prices.

 In July 2010, the Dodd-Frank Act was enacted, representing an extensive overhaul of the framework for regulation of U.S. financial markets. The

Dodd-Frank Act called for various regulatory agencies, including the SEC and the Commodities Futures Trading Commission (CFTC), to establish

regulations for implementation of many of the provisions of the Dodd-Frank Act. The Act contains significant derivatives regulations, including

requirements that certain transactions be cleared on exchanges and that cash collateral (margin) be posted for such transactions. The Act provides for an

exemption from the clearing and cash collateral requirements for commercial end-users, such as Cimarex, and it includes a number of defined terms

used in determining how this exemption applies to particular derivative transactions and the parties to those transactions.

 At this time we believe we have satisfied the requirements for the commercial end-user clearing exemption and continue to engage in derivative

transactions. However, the CFTC is still finalizing rules which will have an impact on our hedging counterparties and possibly end-users as well. The

ultimate effect of these new rules and any additional regulations is currently uncertain. New rules and regulations in this area may result in significant

increased costs, reporting or disclosure obligations.

14

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

We have been an early entrant into new or emerging resource development projects. As a result, our drilling results in these areas are uncertain.

The value of our undeveloped acreage may decline and we may incur impairment charges if drilling results are unsuccessful.

 New or emerging oil and gas resource development projects have limited or no production history. Consequently, in those areas we may not have

past drilling results to help predict our future drilling results. Therefore, our cost of drilling, completing and operating wells in these areas may be higher

than initially expected. The value of our undeveloped acreage may decline if drilling results are unsuccessful. Furthermore, if drilling results are

unsuccessful, we may be required to write down the carrying value of our undeveloped acreage in new or emerging plays.

 Unless production is established during the primary term of certain of our undeveloped oil and gas leases, the leases will expire and we will lose

our right to develop those properties.

Our business depends on oil and gas transportation facilities, some of which are owned by others.

 Our oil and natural gas production depends in large part on the availability, proximity and capacity of pipeline systems and transportation facilities.

The lack of available capacity on these systems and facilities (or the lack of such systems and facilities in proximity to our wells) could result in the

curtailment of production or the delay or discontinuance of drilling plans. The lack of availability of these facilities for an extended period of time could

negatively affect our revenues.

 Federal and state regulation of oil and natural gas production and transportation, adverse court rulings, tax and energy policies, changes in supply

and demand, pipeline pressures, damage to or destruction of pipelines and general economic conditions could adversely affect our ability to produce,

gather and transport oil and natural gas.

Competition in our industry is intense and many of our competitors have greater financial and technological resources.

 We operate in the competitive area of oil and gas exploration and production. Many of our competitors are large, well-established companies that

have larger operating staffs and greater capital resources than Cimarex. These companies may be willing to pay more for exploratory prospects and

productive oil and gas properties. They may also be able to define, evaluate, bid for and purchase a greater number of properties and prospects than our

financial or human resources permit.

We may be subject to information technology system failures, network disruptions and breaches in data security.

 Information system failures, network disruptions and breaches in data security could have a material adverse effect on our ability to conduct our

business. We could experience system failures due to power or telecommunications failures, human error, natural disasters, fire, sabotage, hardware or

software malfunction or defects, computer viruses, intentional acts of vandalism or terrorism and similar acts. Such system failures could result in the

unanticipated disruption of our operations, the processing of transactions and the reporting of our financial results. While management has taken steps to

address these concerns by implementing sophisticated network security and internal control measures, there can be no assurance that a system failure or

data security breach will not have a material adverse effect on our financial condition and operation results.

We are subject to complex laws and regulations that can adversely affect the cost, manner or feasibility of doing business.

 Exploration, production and the sale of oil and gas are subject to extensive laws and regulations, including laws and regulations protecting the

environment and human health and safety. Federal and state regulatory agencies frequently require permitting and impose conditions on our activities.

During the

15

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

permitting process, these regulatory authorities often exercise considerable discretion in both the timing and ultimate scope of the permits. The

requirements or conditions imposed by these authorities can be costly, possibly resulting in delays in the commencement of our operations. Further, if

the required permits are not issued or if the current requirements become more burdensome, costs could materially increase and operations could be

significantly restricted.

 Failing to comply with any of the applicable laws and regulations could result in the suspension or termination of our operations and subject us to

administrative, civil and criminal penalties. Such liabilities and costs could have a material adverse effect on both our financial condition and operations.

Environmental matters and costs can be significant.

 As an owner, lessee or operator of oil and gas properties, we are subject to various complex and constantly evolving environmental laws and

regulations. Our operations inherently create the risk of environmental liability to the government and private parties stemming from our use, generation,

handling and disposal of water, waste materials, petroleum hydrocarbons or other substances into the air, soil or water.

 Liabilities under environmental law can be joint and several and may in some cases be imposed regardless of fault on our part. We could be held

liable for remediating facilities that were previously owned or operated by others. Since these environmental risks generally are not fully insurable and

can result in substantial costs, such liabilities could have a material adverse effect on both our financial condition and operations.

Our hydraulic fracturing activities are subject to risks that could negatively impact our operations and profitability.

 We use hydraulic fracturing for almost all of our wells. Hydraulic fracturing is a process that involves pumping fluid and proppant at high pressure

into a hydrocarbon bearing formation to create and hold open fractures. Those fractures enable gas or oil to move through the formation's pores to the

well bore. The fluid used in this process is primarily water. In developing plays where hydraulic fracturing is necessary for the successful development,

the demand for water may exceed the supply. A lack of readily available water or a significant increase in the cost of water could cause delays or

increased completion costs.

 In addition to water, hydraulic fracturing fluid contains chemicals or additives designed to optimize production. Certain states are requiring

companies to disclose the components of this fluid. Additional states, as well as the Federal government, may follow with similar or conflicting

requirements or may restrict the use of certain additives, resulting in more costly or less effective development of wells.

 Efforts to regulate hydraulic fracturing by local municipalities, states and at the federal level are increasing. Many new regulations are being

considered, including limiting water withdrawals and usage, water disposition, restricting which additives may be used, implementing state-wide

hydraulic fracturing moratoriums and temporary or permanent bans in certain environmentally sensitive areas. Public sentiment against hydraulic

fracturing and shale gas production has become more vocal, which could render permitting and compliance requirements to become more stringent.

Consequences of these actions could potentially increase our capital, compliance and operating costs significantly, as well as delay or halt our ability to

develop our oil and gas reserves.

 Any of the above factors could have a material adverse effect on our financial position, results of operations or cash flows.

The adoption of climate change legislation or regulations restricting emission of "greenhouse gases" could result in increased operating costs

and reduced demand for the oil and natural gas we produce.

 Studies have suggested that emission of certain gases, commonly referred to as "greenhouse gases," may be impacting the earth's climate. Methane,

a primary component of natural gas, and carbon dioxide, a

16

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

by-product of the burning of oil and natural gas, are examples of greenhouse gases. The U.S. Congress and various states have been evaluating, and in

some cases implementing, climate-related legislation and other regulatory initiatives that restrict emissions of greenhouse gases. In December 2009, the

Environmental Protection Agency (EPA) issued findings that methane and carbon dioxide present a health and safety issue such that they should be

regulated under the Clean Air Act. Restrictions resulting from federal or state legislation or regulations may have an effect on our ability to produce oil

and gas, as well as the demand for our products. Such changes may result in additional compliance obligations with respect to the release, capture and

use of carbon dioxide that could have an adverse effect on our operations and financial results.

Our limited ability to influence operations and associated costs on non-operated properties could result in economic losses that are partially

beyond our control.

 Other companies operate approximately 20% of our net production. Our success in properties operated by others depends upon a number of

factors outside of our control. These factors include timing and amount of capital expenditures, the operator's expertise and financial resources, approval

of other participants in drilling wells, selection of technology and maintenance of safety and environmental standards. Our dependence on the operator

and other working interest owners for these projects could prevent the realization of our targeted returns on capital in drilling or acquisition activities.

Our business involves many operating risks that may result in substantial losses for which insurance may be unavailable or inadequate.

 Our operations are subject to hazards and risks inherent in drilling for oil and gas, such as fires, natural disasters, explosions, formations with

abnormal pressures, casing collapses, uncontrollable flows of underground gas, blowouts, surface cratering, pipeline ruptures or cement failures. Other

such risks include theft, vandalism, environmental hazards such as natural gas leaks, oil spills and discharges of toxic gases. Any of these risks can

cause substantial losses resulting from:

•

injury or loss of life; 

• damage to, loss of or destruction of property, natural resources and equipment; 

• pollution and other environmental damages; 

•

regulatory investigations and penalties; 

• damage to our reputation; 

• suspension of our operations; and 

• costs related to repair and remediation.

In addition, our liability for environmental hazards may include conditions created by the previous owners of properties that we purchase or lease.

 We maintain insurance coverage against some, but not all, potential losses. We do not believe that insurance coverage for all environmental

damages that could occur is available at a reasonable cost. Losses could occur for uninsurable or uninsured risks, or in amounts in excess of existing

insurance coverage. The occurrence of an event that is not fully covered by insurance could harm our financial condition and results of operation.

We may not be able to generate enough cash flow to meet our debt obligations.

 At December 31, 2012, our long-term debt consisted of $750 million of 5.875% senior notes. In addition to interest expense and principal on our

long-term debt, we have demands on our cash resources including, among others, operating expenses and capital expenditures.

17

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Our ability to pay the principal and interest on our long-term debt and to satisfy our other liabilities will depend upon future performance and our

ability to repay or refinance our debt as it becomes due. Our future operating performance and ability to refinance will be affected by economic and

capital market conditions, results of operations and other factors, many of which are beyond our control. Our ability to meet our debt service obligations

may also be impacted by changes in prevailing interest rates, as borrowing under our existing senior revolving credit facility bears interest at floating

rates.

 Our business may not generate sufficient cash flow from operations. Without sufficient cash flow, there may not be adequate future sources of

capital to enable us to service our indebtedness; or to fund our other liquidity needs. If we are unable to service our indebtedness and fund our operating

costs, we will be forced to adopt alternative strategies that may include:

•

reducing or delaying capital expenditures; 

• seeking additional debt financing or equity capital; 

• selling non-strategic assets; or 

•

restructuring or refinancing debt.

 We may be unable to complete any such strategies on satisfactory terms, if at all. Our inability to generate sufficient cash flows to satisfy our debt

obligations, or to refinance our indebtedness on commercially reasonable terms, would materially and adversely affect our financial condition and results

of operations.

The instruments governing our indebtedness contain various covenants limiting the discretion of our management in operating our business.

 The indenture governing our senior notes and credit agreement contain various restrictive covenants that may limit management's discretion in

certain respects. In particular, these agreements limit Cimarex and its subsidiaries' ability to, among other things:

• pay dividends on, redeem or repurchase our capital stock or redeem or repurchase our subordinated debt; 

• make loans to others; 

• make investments; 

•

incur additional indebtedness or issue preferred stock; 

• create certain liens; 

• sell assets; 

• enter into agreements that restrict dividends or other payments from our restricted subsidiaries to us; 

• consolidate, merge or transfer all or substantially all of the assets of us and our restricted subsidiaries taken as a whole; 

• engage in transactions with affiliates; 

• enter into hedging contracts; 

• create unrestricted subsidiaries; and 

• enter into sale and leaseback transactions.

 In addition, our revolving credit agreement requires us to maintain a debt to EBITDA ratio (as defined in the credit agreement) of less than 3.5 to 1

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
and a current ratio (defined to include undrawn

18

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

borrowings) of greater than 1 to 1. Also, the indenture under which we issued our senior unsecured notes restricts us from incurring additional

indebtedness, subject to certain exceptions, unless our fixed charge coverage ratio (as defined in the indenture) is at least 2.25 to 1. The additional

indebtedness limitation does not prohibit us from borrowing under our revolving credit facility. See Note 5, Long-term Debt, in Notes to Consolidated

Financial Statements for further information.

 If we fail to comply with the restrictions in the indenture governing our senior notes or the agreement governing our credit facility or any other

subsequent financing agreements, a default may allow the creditors, if the agreements so provide, to accelerate the related indebtedness as well as any

other indebtedness to which a cross-acceleration or cross-default provision applies. In addition, lenders may be able to terminate any commitments they

had made to make available further funds.

Our acquisition activities may not be successful, which may hinder our replacement of reserves and adversely affect our results of operations.

 The successful acquisition of producing properties requires an assessment of several factors, including:

• geological risks and recoverable reserves; 

•

future oil and gas prices and their appropriate differentials; 

• operating costs; and 

• potential environmental risks and other liabilities.

 The accuracy of these assessments is inherently uncertain. In connection with these assessments, we perform a review of the subject properties that

we believe to be generally consistent with industry practices. Our review will not reveal all existing or potential problems nor will it permit us to become

sufficiently familiar with the properties to fully assess their deficiencies and capabilities. Inspections will not likely be performed on every well or

facility, and structural and environmental problems are not necessarily observable even when an inspection is undertaken. Even when problems are

identified, the seller may be unwilling or unable to provide effective contractual protection against all or part of the problems.

Competition for experienced, technical personnel may negatively impact our operations.

 Our exploratory and development drilling success depends, in part, on our ability to attract and retain experienced professional personnel. The loss

of any key executives or other key personnel could have a material adverse effect on our operations. As we continue to grow our asset base and the

scope of our operations, our future profitability will depend on our ability to attract and retain qualified personnel, particularly individuals with a strong

background in geology, geophysics, engineering and operations.

We are involved in various legal proceedings, the outcome of which could have an adverse effect on our liquidity.

 In January 2009, the Tulsa County District Court issued a judgment totaling $119.6 million in the "Krug v. Helmerich & Payne, Inc." case. See

Note 13, Commitments and Contingencies in this report for more detailed information.

 Because this case is subject to further appeal and despite the fact that the ultimate outcome currently is unknown, we have accrued for the District

Court's original judgment in our financial statements. If the District Court's original judgment is ultimately affirmed in its entirety, the $119.6 million

plus the then determined amount of post-judgment interest and costs would become payable. This could have an adverse effect on our liquidity.

 In the normal course of business, we have other various lawsuits and related disputed claims. Although we currently believe the resolution of these

lawsuits and claims, individually or in the aggregate,

19

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

would not have a material adverse effect on our financial condition or results of operations, our assessment of our current litigation and other legal

proceedings could change in light of the discovery of facts with respect to legal actions or other proceedings pending against us not presently known to

us or determinations by judges, juries or other finders of fact which are not in accord with our evaluation of the possible liability or outcome of such

litigation or proceedings. Therefore, there can be no assurance that outcomes of future legal proceedings would not have an adverse effect on our

liquidity and capital resources.

Certain federal income tax deductions currently available with respect to natural gas and oil exploration and development may be eliminated, as a

result of future legislation.

 The Fiscal Year 2013 Budget proposed by President Obama recommends elimination of certain key U.S. federal income tax incentives currently

available to oil and natural gas exploration and production companies. Legislation has been introduced in Congress which would implement many of

these proposals. These changes include, but are not limited to, (i) the repeal of the percentage depletion allowance for oil and gas properties; (ii) the

elimination of current deductions for intangible drilling and development costs; and (iii) an extension of the amortization period for certain geological

and geophysical expenditures. It is unclear, however, whether any such changes will be enacted or how soon such changes could be effective.

 The passage of this legislation or any other similar change in U.S. federal income tax law could eliminate or postpone certain tax deductions that

are currently available with respect to natural gas and oil exploration and development, and any such change could have an adverse effect on our

financial position.

ITEM 1B. UNRESOLVED STAFF COMMENTS 

 None.

ITEM 2. PROPERTIES 

Oil and Gas Reserves

 All of our proved reserves and undeveloped acreage are located in the United States. We have varying levels of ownership interests in our

properties consisting of working, royalty and overriding royalty interests. We operate the wells that comprise 68% of our proved reserves. All

information in this Form 10-K relating to oil and gas reserves is net to our interest unless stated otherwise. See Note 15, Unaudited Supplemental Oil

and Gas Disclosures, in Notes to Consolidated Financial Statements for further information. The following table sets forth the present value and

estimated volume of our oil and gas proved reserves:

20

Years Ending December 31,

2012 2011 2010

Total Proved Reserves—

Gas (MMcf) 1,251,863 1,216,441 1,254,166

Oil (MBbls) 77,921 72,322 63,656

NGL (MBbls) 89,909 65,815 41,310

Equivalent (MMcfe) 2,258,844 2,045,265 1,883,957

Standardized measure of discounted future net cash flow after-tax,

discounted at 10% (in millions) $ 2,908.7 $ 3,139.8 $ 2,515.3

Average price used in calculation of future net cash flow—

Gas ($/Mcf) $ 2.27 $ 3.79 $ 4.12

Oil ($/Bbl) $ 88.91 $ 89.64 $ 75.35

NGL ($/Bbl) $ 29.12 $ 41.70 $ 33.89

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Proved oil and gas reserve quantities are based on estimates prepared by Cimarex in accordance with the SEC's modernized rules for reporting oil

and gas reserves. Reserve definitions comply with definitions of Rules 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 will also confer with the 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,

reviewed greater than 80% of the total future net revenue discounted at 10% attributable to the total interests owned by Cimarex as of December 31,

2012. 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 thirty-eight years of experience in oil and gas reservoir studies and 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

eighteen 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 eight years.

Significant Properties

 As of December 31, 2012, 99% of our total proved reserves were located in the Mid-Continent and Permian Basin regions. In total we owned an

interest in 13,127 gross (4,953 net) productive oil and gas wells.

 The following table summarizes our estimated proved oil and gas reserves by region as of December 31, 2012.

21

Gas

(Bcf)

Oil

(MBbl)

NGL

(MBbl)

Equivalent

(Bcfe)

Percent of

Proved

Reserves

Mid-Continent 996.8 17,984 70,615 1,528.3 68%

Permian Basin 233.2 58,623 18,634 696.8 31%

Gulf Coast/Other 21.9 1,314 660 33.7 1%

1,251.9 77,921 89,909 2,258.8 100%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Our ten largest producing fields hold 70% of total proved reserves. We are the principal operator of our production in each of these fields. The

table below summarizes certain key statistics about these properties.

22

Field Region

% of

Total

Proved

Reserves

Average

Working

Interest %

Approximate

Average

Depth (feet) Primary Formation

WatongaChickasha

(Cana)

MidContinent 50.1 35.8 13,000' Woodford

Lusk Permian 3.4 43.7 9,500' Bone Spring

Triple Crown

Wolfcamp Permian 2.9 100.0 9,500' Wolfcamp

Two Georges Permian 2.9 88.8 11,500' Bone Spring

Phantom Permian 2.6 55.0 11,500' Bone Spring

EolaRobbersonMidContinent 2.1 90.05,500' -

11,000'

Bromide/McLish/Oil

Creek

Cottonwood

Draw Permian 1.6 85.6

3,000' -

10,000' Delaware/Wolfcamp

Caprock Permian 1.5 72.8 9,000' Abo

Quail Ridge Permian 1.5 69.4

8,000' -

13,000'

Bone

Spring/Morrow

Benson Permian 1.0 85.5 9,500' Bone Spring

69.6

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Acreage

 The following table sets forth the gross and net acres of both developed and undeveloped leases held by Cimarex as of December 31, 2012. 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.

23

Acreage

Undeveloped Developed Total

Gross Net Gross Net Gross Net

MidContinent

Kansas 18,973 18,864 118,111 86,454 137,084 105,318

Oklahoma 152,524 122,115 544,173 280,060 696,697 402,175

Texas 139,977 126,053 197,418 119,662 337,395 245,715

311,474 267,032 859,702 486,176 1,171,176 753,208

Permian Basin

New Mexico 100,695 75,727 187,316 131,922 288,011 207,649

Texas 134,930 112,010 162,498 118,034 297,428 230,044

235,625 187,737 349,814 249,956 585,439 437,693

Gulf Coast

Louisiana 5,968 1,657 12,259 3,195 18,227 4,852

Texas 129,621 103,959 102,063 36,961 231,684 140,920

Offshore 25,762 13,000 72,350 17,308 98,112 30,308

161,351 118,616 186,672 57,464 348,023 176,080

Western/Other

Arizona 2,111,1392,111,139 17,207 — 2,128,346 2,111,139

California 382,124 382,124 364 364 382,488 382,488

Colorado 90,320 62,719 36,758 2,203 127,078 64,922

Michigan 53,603 53,525 1,183 1,183 54,786 54,708

Montana 36,095 10,590 7,319 1,698 43,414 12,288

Nevada 1,196,299 1,196,299 440 1 1,196,739 1,196,300

New Mexico 1,643,240 1,629,395 19,722 2,518 1,662,962 1,631,913

Utah 87,932 59,373 28,290 1,632 116,222 61,005

Wyoming 108,218 15,809 45,290 5,292 153,508 21,101

Other 66,555 47,616 8,198 3,222 74,753 50,838

5,775,525 5,568,589 164,771 18,113 5,940,296 5,586,702

Total 6,483,975 6,141,974 1,560,959 811,709 8,044,934 6,953,683

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 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.

Gross Wells Drilled

 We participated in drilling the following number of gross wells during calendar years 2012, 2011, and 2010:

 We were in the process of drilling 37 gross (14.9 net) wells at December 31, 2012, and there were 64 gross (29.8 net) wells waiting on

completion.

Net Wells Drilled

 The number of net wells drilled during calendar years 2012, 2011, and 2010 are shown below:

Productive Wells

 We have working interests in the following productive wells as of December 31, 2012:

24

Undeveloped Acres Expiring

2013 2014 2015 2016 2017

Gross Net Gross Net Gross Net Gross Net Gross Net

Mid-Continent 59,308 50,735 23,538 23,245 12,084 12,039 11,239 11,239 21 21

Permian Basin 37,737 37,039 17,206 16,405 46,931 39,343 6,096 6,072 991 991

Gulf Coast 85,116 84,211 7,816 7,735 879 879 1 1 — —

Western/Other 45,704 45,704 7,602 7,562 17,954 17,954 198,369 198,369 56,120 56,120

227,865 217,689 56,162 54,947 77,848 70,215 215,705 215,681 57,132 57,132

Percent of

undeveloped 3.5 3.5 0.9 0.9 1.2 1.1 3.3 3.5 0.9 0.9

Exploratory Developmental

Productive Dry Total Productive Dry Total

Year ended December 31, 2012 8 5 13 328 11 339

Year ended December 31, 2011 3 7 10 314 7 321

Year ended December 31, 2010 10 3 13 199 7 206

Exploratory Developmental

Productive Dry Total Productive Dry Total

Year ended December 31, 2012 6.3 2.6 8.9 177.0 6.1 183.1

Year ended December 31, 2011 2.5 6.2 8.7 158.9 5.9 164.8

Year ended December 31, 2010 9.4 3.0 12.4 111.4 5.2 116.6

Gas Oil

Gross Net Gross Net

Mid-Continent 4,394 2,220 1,295 577

Permian 1,142 603 5,066 1,392

Gulf Coast / Other 393 111 837 50

5,929 2,934 7,198 2,019

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 3. LEGAL PROCEEDINGS 

 In January 2009, the Tulsa County District Court issued a judgment totaling $119.6 million in the H.B. Krug, et al. versus Helmerich & Payne

(H&P) case. This lawsuit originally was filed in 1998 and addressed H&P's conduct pertaining to a 1989 take-or-pay settlement, along with potential

drainage and other related issues. Pursuant to the 2002 spin-off transaction to shareholders of H&P, by which Cimarex became a publicly-traded entity,

Cimarex assumed the assets and liabilities of H&P's exploration and production business, including this lawsuit. In 2008 we recorded a litigation

expense of $119.6 million for this lawsuit. We have accrued additional post-judgment interest and costs during the appeal of the District Court's

judgment.

 On December 11, 2012, Cimarex entered into a preliminary resolution of the Hitch Enterprises, Inc., et al. v. Cimarex Energy Co., et al. (Hitch)

litigation matter for $16.4 million. Hitch was filed as a statewide royalty putative class action in the Federal District Court in Oklahoma City, Oklahoma.

The settlement was reached at a mediation, which occurred after the parties began to exchange information, including damage analyses, on

November 16, 2012. The Court has entered an order preliminarily approving the parties' settlement. The deadline for putative class members to opt out

of the settlement class was February 15, 2013, and less than 1/2% of the class members opted out. The Court will hold the settlement fairness hearing on

March 22, 2013. In the fourth quarter of 2012, we accrued $16.4 million for this matter.

 Additional information regarding these and other litigation is included in Note 13, Commitments and Contingencies, of the notes to our

consolidated financial statements included in Item 8 of this report.

ITEM 4. MINE SAFETY DISCLOSURES 

 Not applicable.

ITEM 4A. EXECUTIVE OFFICERS 

 The executive officers of Cimarex as of February 26, 2013 were:

 There are no family relationships by blood, marriage, or adoption among any of the above executive officers. All executive officers are elected

annually by the board of directors to serve for one year or until a successor is elected and qualified. There is no arrangement or understanding between

any of the officers and any other person pursuant to which he was selected as an executive officer.

 THOMAS E. JORDEN was elected chairman of the board effective August 14, 2012 after being named president and chief executive officer

effective September 30, 2011. Since December 8, 2003, Mr. Jorden served as executive vice president of exploration and had served in a similar

capacity since September 30, 2002. Prior to September 2002, Mr. Jorden was with Key Production Company, Inc., where he served as vice president of

exploration (October 1999 to September 2002) and chief geophysicist (November 1993 to September 1999). Prior to joining Key, Mr. Jorden was with

Union Pacific Resources.

25

Name Age Office

Thomas E.

Jorden 55 Chairman of the Board, President and Chief Executive Officer

Joseph R. Albi 54 Executive Vice President and Chief Operating Officer

Stephen P. Bell 58 Executive Vice President, Business Development

Paul Korus 56 Senior Vice President and Chief Financial Officer

Gary R. Abbott 40 Vice President, Corporate Engineering

Richard S.

Dinkins 68 Vice President, Human Resources

John Lambuth 50 Vice President, Exploration

Thomas A.

Richardson 67 Vice President, General Counsel

James H.

Shonsey 61 Vice President, Chief Accounting Officer, and Controller

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 JOSEPH R. ALBI was named executive vice president and chief operating officer effective September 30, 2011. Mr. Albi served as executive

vice president of operations since March 1, 2005. Since December 8, 2003, Mr. Albi served as senior vice president of corporate engineering. From

September 30, 2002 to December 8, 2003, he served as vice president of engineering. From October 1999 to September, 2002, Mr. Albi was with Key

Production Company, Inc. where he served as vice president of engineering and manager of engineering.

 STEPHEN P. BELL was named executive vice president, business development effective September 13, 2012. Since September, 2002, Mr. Bell

served as senior vice president of business development and land. Prior to its merger with Cimarex, Mr. Bell was with Key Production Company, Inc.

since February 1994. In September 1999, he was appointed senior vice president, business development and land. From February 1994 to September

1999, he served as vice president, land.

 PAUL KORUS was named senior vice president in December 2010 and has served as chief financial officer of Cimarex since September 2002.

From June 1999 to September 2002, Mr. Korus was vice president and chief financial officer of Key Production Company. Prior to Key, he was an

equity research analyst with an energy investment banking firm from 1995 to 1999 and was with Apache Corporation from 1982 to 1995.

 GARY R. ABBOTT was elected vice president of corporate engineering March 1, 2005. Since January 2002, Mr. Abbott served as manager,

corporate reservoir engineering. From April 1999 to January 2002, Mr. Abbott was a reservoir engineer with Key Production Company, Inc.

 RICHARD S. DINKINS was named vice president of human resources on December 8, 2003. Mr. Dinkins joined Key Production

Company, Inc. in March 2002 as its director of human resources and continued in that position with Cimarex commencing in September 2002. Prior to

joining Key, Mr. Dinkins was with Sprint and before that, served as Vice President of Human Resources for Terra Resources, Inc. and Pacific

Enterprises Oil Company.

 JOHN LAMBUTH was named vice president of exploration in September 2012. Prior to his promotion, he served as the company's chief

geophysicist, a position he held since joining Cimarex in 2004. Mr. Lambuth began his career in 1985 with Shell Oil Co., where he held various

positions in exploration and in research and development. Immediately prior to joining Cimarex, he spent three years as onshore exploration manager of

El Paso Energy Company. Mr. Lambuth holds a Bachelors' Degree in Geophysical Engineering from the Colorado School of Mines.

 THOMAS A. RICHARDSON joined Cimarex in August 2008 and was elected vice president and general counsel on September 20, 2008.

Mr. Richardson retired as a senior partner of Holme Roberts & Owen LLP, a Denver law firm, in December 2007. Mr. Richardson joined Holme

Roberts in June 1970 and served as a partner of the firm from 1975 to his retirement. His specialties at the firm included corporate, securities and

merger and acquisition law.

 JAMES H. SHONSEY was named vice president in April 2006. Mr. Shonsey was elected chief accounting officer and controller on May 28,

2003. From 2001 to May 2003, Mr. Shonsey was chief financial officer of The Meridian Resource Corporation; and from 1997 to 2001, he served as

the chief financial officer of Westport Resources Corporation.

26

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

PART II 

ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS 

 Our $0.01 par value common stock trades on the New York Stock Exchange under the symbol XEC. A cash dividend was paid to shareholders in

each quarter of 2012. Future dividend payments will depend on the company's level of earnings, financial requirements and other factors considered

relevant by the Board of Directors.

 Stock Prices and Dividends by Quarter. The following table sets forth, for the periods indicated, the high and low sales price per share of

Common Stock on the NYSE and the quarterly dividends paid per share.

 The closing price of Cimarex stock as reported on the New York Stock Exchange on February 15, 2013, was $64.95. At December 31, 2012,

Cimarex's 86,595,976 shares of outstanding common stock were held by approximately 2,356 stockholders of record.

27

2012 High Low

Dividends

Paid Per

Share

First Quarter $ 87.85 $ 55.87 $ 0.10

Second Quarter $ 76.74 $ 46.19 $ 0.12

Third Quarter $ 63.91 $ 50.03 $ 0.12

Fourth Quarter $ 64.26 $ 55.74 $ 0.12

2011 High Low

Dividends

Paid Per

Share

First Quarter $ 117.95 $ 87.60 $ 0.08

Second Quarter $ 117.94 $ 81.65 $ 0.10

Third Quarter $ 93.24 $ 55.29 $ 0.10

Fourth Quarter $ 71.22 $ 50.80 $ 0.10

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 The following graph compares the cumulative 5-year total return attained by shareholders on Cimarex Energy Co.'s common stock relative to the

cumulative total returns of the S&P 500 index and the Dow Jones US Exploration & Production index. The graph tracks the performance of a $100

investment in our common stock and in each of the indexes (with the reinvestment of all dividends) from December 31, 2007 to December 31, 2012.

COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN* 

 The stock price performance included in this graph is not necessarily indicative of future stock price performance.

ITEM 5C. STOCK REPURCHASES 

 In December 2005, the Board of Directors authorized the repurchase of up to four million shares of our common stock. The authorization expired

on December 31, 2011. Through December 31, 2007, we had repurchased and cancelled a total of 1,364,300 shares at an overall average price of

$39.05. No shares have been repurchased since the quarter ended September 30, 2007.

28

* $100 invested on 12/31/07 in stock or index, including reinvestment of dividends. 

Fiscal year ending December 31.

Copyright© 2013 S&P, a division of The McGraw-Hill Companies, Inc. All rights reserved.

Copyright© 2013 Dow Jones & Co. All rights reserved.

12/07 12/08 12/09 12/10 12/11 12/12

Cimarex Energy Co. 100.00 63.31 126.16 211.78 148.80 139.79

S&P 500 100.00 63.00 79.67 91.67 93.61 108.59

Dow Jones US Exploration & Production 100.00 59.88 84.17 98.26 94.14 99.62

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 6. SELECTED FINANCIAL DATA 

 The selected financial data set forth below should be read in conjunction with the consolidated financial statements and accompanying notes thereto

provided in Item 8 of this Report.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION 

 The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements included in Item 8 of this report

and also with "Certain Risks" in Item 1A of this report. Certain amounts in prior years' financial statements have been reclassified to conform to the

2012 financial statement presentation. This discussion also includes forward-looking statements. Please refer to "Cautionary Information about

Forward-Looking Statements" in Part I of this report for important information about these types of statements.

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, New Mexico, and Kansas.

 Our principal business objective is to profitably grow proved reserves and production for the long-term benefit of our shareholders through a

diversified drilling portfolio. Our strategy centers on maximizing cash flow from producing properties and profitably reinvesting that cash flow in

exploration and development. We occasionally consider property acquisitions and mergers to enhance our competitive position.

29

For the Years Ended December 31,

2012 2011 2010 2009 2008

(in millions, except per share amounts)

Operating results:

Gas, oil and NGL sales $ 1,582 $ 1,704 $ 1,559 $ 962 $ 1,881

Total Revenues 1,624 1,758 1,614 1,010 1,970

Net income (loss) 354 530 575 (312) (915)

Earnings (loss) per share to common Stockholders:

Basic $ 4.08 $ 6.17 $ 6.74 $ (3.82) $ (11.22)

Diluted $ 4.07 $ 6.15 $ 6.70 $ (3.82) $ (11.22)

Cash dividends declared per share $ 0.48 $ 0.40 $ 0.32 $ 0.24 $ 0.24

Balance sheet data:

Total assets $ 6,305 $ 5,358 $ 4,287 $ 3,374 $ 4,094

Total debt $ 750 $ 405 $ 350 $ 393 $ 588

Stockholders' equity $ 3,475 $ 3,131 $ 2,610 $ 2,038 $ 2,352

Cash flow data:

Net cash provided by operating activities $ 1,193 $ 1,292 $ 1,130 $ 675 $ 1,367

Net cash used in investing activities $ (1,415) $ (1,429) $ (978) $ (444) $ (1,597)

Net cash provided by (used in) financing activities $ 289 $ 25 $ (41) $ (230) $ 107

Proved Reserves:

Gas (Bcf) 1,252 1,216 1,254 1,187 1,067

Oil (MBbls) 77,921 72,322 63,656 56,764 44,286

NGL (MBbls) 89,909 65,815 41,310 1,253 916

Total equivalent (Bcfe) 2,259 2,045 1,884 1,535 1,339

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 In order to achieve a consistent rate of growth and mitigate risk, we have historically maintained a blended portfolio of low, moderate, and higher

risk exploration and development projects. We seek geologic and geographic diversification by operating in multiple basins. In recent years, we have

shifted our capital expenditures to oil and liquids-rich gas projects because of strong oil prices relative to gas prices. We deal with volatility in

commodity prices by maintaining flexibility in our capital investment program.

 Our operations are currently focused in two main areas: the Mid-Continent region and the Permian Basin. The Mid-Continent region consists of

Oklahoma, the Texas Panhandle, and southwest Kansas. Our Permian Basin region encompasses west Texas and southeast New Mexico. We also have

operations in the Gulf Coast area, primarily in southeast Texas.

 Growth is generally funded with cash flow provided by operating activities together with bank borrowings, sale of non-strategic assets and

occasional public financing. Conservative use of leverage and maintaining a strong balance sheet have long been a part of our financial strategy. We

have a long track record of profitable growth.

 Our revenue, profitability, and future growth are highly dependent on the commodity prices we receive. Prices impact the amount of cash flow

available for capital expenditures, our ability to raise additional capital and the fair market value of our assets. We use the full cost method of accounting

for oil and gas activities. An extended decline in oil and/or gas prices could have an adverse effect on our financial position and results of operations,

including the determination of full cost accounting ceiling test writedowns.

 The preparation of our financial statements in conformity with generally accepted accounting principles requires us to make estimates and

assumptions that impact reported results of operations and the amount of reported assets, liabilities, equity and proved reserves.

2012 Summary:

• Average daily production increased by 6% to 627 MMcfe/d compared to 592 MMcfe/d in 2011. 

• Our combined Permian Basin and Mid-Continent production grew 20% to an all-time high of 586 MMcfe/d, compared to 487 MMcfe/d

in 2011. 

• We added 757.3 Bcfe of proved reserves from extensions and discoveries, replacing 330% of production. 

• Proved reserves increased 10% to 2.26 Tcfe. Adjusted for property sales, proved reserves increased 13%. 

• Exploration and development expenditures totaled $1.6 billion. 

• Cash flow provided by operating activities totaled $1.2 billion. 

• Net income was $353.8 million, or $4.07 per diluted share. This compares to 2011 net income of $529.9 million, or $6.15 per diluted

share. 

• We issued $750 million of 5.875% senior notes at par and retired our 7.125% senior notes. 

• Total debt increased by $345 million to $750 million compared to $405 million at year-end 2011. 

• We sold $305.9 million of non-strategic assets and used the proceeds for general corporate purposes, including repayment of

outstanding bank debt.

 Drilling activities were focused almost exclusively in the Permian Basin and Mid-Continent regions. During 2012, we drilled and completed 352

gross (192 net) wells. Of total wells drilled, 182 gross (122 net) were in the Permian Basin and 167 gross (69 net) were in the Mid-Continent.

30

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 We continue to evaluate and expand our acreage position in key long-term future drilling projects. During 2012, we invested $152.8 million in land

and seismic.

 In July 2012, aggregate commitments on our senior unsecured revolving credit facility were increased from $800 million to $1 billion. The credit

facility provides for a borrowing base of $2 billion and will mature on July 14, 2016. We did not have any bank debt outstanding at December 31,

2012. At December 31, 2011, our outstanding bank debt was $55 million.

Proved Reserves

 Year-end 2012 proved reserves grew 10% to 2.26 Tcfe, up from 2.05 Tcfe at year-end 2011. The increase in 2012 proved reserves is net of

production of 229.3 Bcfe and sales of 57.3 Bcfe. Proved reserves were 80% developed at year-end 2012 compared to 82% at year-end 2011. Overall,

approximately 68% of proved reserves were in our Mid-Continent region and 31% in the Permian Basin.

 Reserves added from extensions and discoveries totaled 757.3 Bcfe, replacing 330% of production. In our western Oklahoma Cana-Woodford

shale area, we added 202.5 Bcfe from infill wells drilled and 315.9 Bcfe of proved undeveloped (PUD) reserves. Development drilling in the Permian

Basin added 229.2 Bcfe. In total, reserve additions were comprised of 51% oil and NGLs and 49% gas. With continued focus on oil and liquids-rich

gas projects, the amount of proved reserves comprised of oil and NGLs increased to 45% as compared to 41% at year-end 2011.

 Approximately 72 Bcfe of the 257.3 Bcfe net negative revisions during 2012 relate to production performance of certain wells recently drilled in

our Cana-Woodford shale project. PUD reserve additions in extensions and discoveries for 2012 now reflect revised expectations of future production

performance. The remainder of the net negative revision primarily resulted from decreases in prices (91 Bcfe), increases in operating expenses (21 Bcfe)

which shortened the economic lives, adjustments to previously booked PUD reserves (25 Bcfe) and the removal of PUD locations due to altered future

drilling plans (42 Bcfe).

 The process of estimating quantities of oil, gas and NGL reserves is complex. Significant decisions are required in the evaluation of all available

geological, geophysical, engineering and economic data. The data for a given field may also change substantially over time as a result of numerous

factors including, but not limited to, additional development activity, evolving production history, contractual arrangements and continual reassessment

of the viability of production under varying economic conditions. As a result, material revisions to existing reserve estimates may occur from time to

time.

 Although every reasonable effort is made to ensure that our reserve estimates represent the most accurate assessments possible, subjective

decisions and available data for our various fields make these estimates generally less precise than other estimates included in financial statement

disclosures. See Note 15 to the Consolidated Financial Statements of this report for further discussion regarding our proved reserves.

Revenues

 Most of our revenues are derived from sales of oil, gas and NGL production. While revenues are a function of both production and prices, wide

swings in commodity prices have had the greatest impact on our results of operations. Compared to 2011, our 2012 average realized gas price decreased

by 35% and our average realized NGL price decreased by 28%. Our average oil price decreased 4%. Prices we receive are determined by prevailing

market conditions. Regional and worldwide economic and geopolitical activity, weather and other variable factors influence market conditions, which

often result in significant volatility in commodity prices.

31

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 The following table presents our average realized commodity prices. Realized prices do not include settlements of our commodity hedging

contracts.

 On an energy equivalent basis, 52% of our 2012 aggregate production was natural gas. A $0.10 per Mcf change in our average realized gas sales

price would have resulted in a $12 million change in our gas revenues. Similarly, 48% of our production was crude oil and NGLs. A $1.00 per barrel

change in our average realized sales prices would have resulted in an $18 million change in our oil and NGL revenues.

 See RESULTS OF OPERATIONS below for a discussion of the impact changes in realized prices had on our 2012 revenues.

Production and other operating expenses

 Costs associated with finding and producing oil and gas are substantial. Some of these costs vary with commodity prices, some trend with the type

and volume of production and others are a function of the number of wells we own. At the end of 2012, we owned interests in 13,127 gross wells.

 Production expense generally consists of the cost of water disposal, power and fuel, direct labor, third-party field services, compression and certain

maintenance activity (workovers) necessary to produce oil and gas from existing wells.

 Transportation expense is comprised of costs paid to move oil and gas from the wellhead to a specified sales point. In some cases we receive a

payment from purchasers which is net of transportation costs, and in other instances we pay separately for transportation. If costs are netted in the

proceeds received, both the gross revenues and gross costs are shown in sales and expenses, respectively.

 Depreciation, depletion, and amortization (DD&A) of our producing properties is computed using the units-of-production method. The economic

life of each producing well depends upon the assumed price for future sales of 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. Lower

prices generally have the effect of decreasing reserves which increases depletion expense. The costs of replacing production also impact our DD&A

rate. In addition, changes in estimates of reserve quantities, estimates of operating and future development costs, and reclassifications from unproved

properties to proved properties will impact depletion expense.

 We use the full cost method of accounting for our oil and gas operations. Accounting rules require us to perform a quarterly "ceiling test"

calculation to test our oil and gas properties for possible impairment. The primary components impacting this analysis are commodity prices, reserve

quantities added and produced, overall exploration and development costs, and depletion expense. If the net capitalized cost of our oil and gas properties

subject to amortization (the carrying value) exceeds the ceiling limitation, the excess would be expensed. The ceiling limitation is equal to the sum of the

present value discounted at 10% of estimated future net cash flows from proved reserves, the cost of properties not being amortized,

32

Years Ended

December 31,

2012 2011 2010

Gas Prices:

Average Henry Hub price ($/Mcf) $ 2.79 $ 4.04 $ 4.39

Average realized sales price ($/Mcf) $ 2.88 $ 4.42 $ 4.92

Oil Prices:

Average WTI Cushing price ($/Bbl) $ 94.20 $ 95.14 $ 79.54

Average realized sales price ($/Bbl) $ 89.25 $ 93.00 $ 76.76

NGL Prices:

Average realized sales price ($/Bbl) $ 30.66 $ 42.31 $ 34.91

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

the lower of cost or estimated fair value of unproven properties included in the costs being amortized, and all related tax effects.

 At December 31, 2012, 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, the amount of the excess has declined approximately 87% since December 31, 2011. As of December 31,

2012, a decline of 3% or more in the value of the ceiling limitation would have resulted in an impairment. If negative trends continue we may incur

impairment charges in the future, which could have a material adverse effect on our results of operations in the period taken.

 General and administrative (G&A) expenses consist primarily of salaries and related benefits, office rent, legal fees, consultants, systems costs and

other administrative costs incurred in our offices and not directly associated with exploration, development or production activities. Our G&A expense

is reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by Cimarex and net of amounts capitalized

pursuant to the full cost method of accounting.

 See RESULTS OF OPERATIONS below for a discussion of changes in production and other operating expenses.

Derivative Instruments/Hedging

 We periodically enter into derivative instruments to mitigate a portion of our potential exposure to a decline in oil and/or gas prices and the

corresponding negative impact on cash flow available for reinvestment. While the use of these instruments limits the downside risk of adverse price

changes, their use may also limit future revenues from favorable price changes.

 For 2012, we hedged about half of our anticipated oil production. We did not hedge any of our gas or NGL production. All of the oil contracts

expired during 2012 without any cash settlements.

 In 2011 we had approximately 40 to 45% of our anticipated oil production and 5 to 6% of projected gas production hedged. Those contracts were

settled in 2011 for a net gain of $6.7 million. During 2010 we had approximately 40% of our anticipated 2010 oil and gas production hedged. Those

contracts settled in 2010 for a net gain of $52.1 million.

 As of December 31, 2012, we did not have any hedges in place. Subsequent to December 31, 2012 we entered into oil contracts as follows:

 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 hedging positions.

 We have chosen not to apply hedge accounting treatment to any of the derivative contracts we have entered into since 2009. Therefore, settlements

on our derivative contracts do not impact our realized commodity prices during the periods they cover. Instead, any settlements on the contracts are

shown as a component of operating costs and expenses as either a net gain or loss on derivative instruments. See Item 7A and Note 2 to the

Consolidated Financial Statements of this report for additional information regarding our derivative instruments.

33

Weighted Average Price

Period Type Volume/Day Index(1) Floor Ceiling Swap

Feb 13 - Dec 13 Collars 6,000 Bbls WTI $ 85.00 $ 102.31 —

Feb 13 - Dec 13 Swaps 6,000 Bbls WTI — — $ 96.13

(1) WTI refers to West Texas Intermediate price as quoted on the New York Mercantile Exchange.

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

RESULTS OF OPERATIONS

2012 compared to 2011

 Net income for the year ended December 31, 2012, was $353.8 million, or $4.07 per diluted share. For 2011, we had net income of

$529.9 million, or $6.15 per diluted share. Decreased revenues from lower realized commodity prices and higher DD&A expense were the primary

factors for the decrease in 2012 net income. These changes are discussed further in the analysis that follows.

For the Years Ended

December 31,

Percent

Change

Between Price / Volume Change

Commodity Sales 2012 2011 2012/2011 Price Volume Total

(in thousands or

as indicated)

Gas sales $ 340,744 $ 530,334 -36%$(182,482)$ (7,108)$(189,590)

Oil sales 1,027,757 909,344 13% (43,185) 161,598 118,413

NGL sales 213,149 263,842 -19% (80,991) 30,298 (50,693)

Total

commodity

sales $1,581,650$1,703,520 -7%$(306,658)$184,788 $(121,870)

Total gas

volume

—MMcf 118,495 120,113 -1%

Gas volume

—MMcf per

day 323.8 329.1

Average gas

price—per

Mcf $ 2.88 $ 4.42 -35%

Total oil

volume

—thousand

barrels 11,516 9,778 18%

Oil volume

—barrels

per day 31,463 26,789

Average oil

price—per

barrel $ 89.25 $ 93.00 -4%

Total NGL

volume

—thousand

barrels 6,952 6,236 11%

NGL volume

—barrels

per day 18,994 17,086

Average NGL

price—per

barrel $ 30.66 $ 42.31 -28%

Total

equivalent

production

volumes

—MMcfe

per day 626.5 592.3 6%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
 Commodity sales totaled $1.6 billion in 2012, compared to $1.7 billion last year. The 7% year-over-year decline was attributable to a $307 million

decrease from lower prices, which was partially offset by $185 million from higher oil and NGL production.

 In 2012, our aggregate production volumes were 626.5 MMcfe per day, up 6% from 592.3 Mcfe per day in 2011. In the fourth quarter of 2012,

our production volumes averaged a record 676.7 MMcfe per day, or 13% above 601.4 MMcfe per day in the fourth quarter 2011. The period-overperiod increases in volumes were a result of our successful drilling programs in the Permian Basin and Mid-Continent region.

 Our 2012 gas production averaged 323.8 MMcf per day, compared to 329.1 MMcf per day for 2011. The 1% decline in year-over-year gas

production resulted in a decrease in revenue of $7.1 million. During the fourth quarter of 2012, our daily gas production averaged 333.4 MMcf per day,

down slightly from 334.2 MMcf per day, for the same period of 2011. The decline in fourth quarter 2012 gas production resulted in $0.5 million less

revenue in the fourth quarter of 2012 compared to the same period of 2011.

 Oil production for 2012 averaged 31,463 barrels per day, up 18% from 26,789 barrels per day for in 2011. The increase in 2012 production

provided an additional $161.6 million of oil revenue. Our fourth quarter 2012 oil production averaged 35,099 barrels per day, an increase of 28%

compared to 27,431 barrels per day for the fourth quarter 2011. The higher production in the fourth quarter of 2012 increased oil sales by $65.4 million.

34

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 In 2012, our average daily NGL production volume was 18,994 barrels per day compared to 17,086 barrels per day for 2011. The 11% higher

volumes contributed $30.3 million of additional revenue. During the fourth quarter of 2012, our average NGL production was 22,118 barrels per day,

up 29% from 17,107 barrels per day during the fourth quarter 2011. Higher production provided an additional $18.6 million of revenue in the fourth

quarter.

 The increases in our 2012 oil and NGL production reflect our continued focus on drilling oil and liquids-rich gas wells in the Permian Basin and

the Cana-Woodford shale.

 Our average realized gas price for 2012 fell to $2.88 per Mcf, compared to $4.42 per Mcf in 2011. The 35% decrease in gas prices resulted in

$182.5 million lower revenues compared to 2011. During the fourth quarter of 2012, our average realized gas price decreased by 14% to $3.35 per Mcf.

For the same period of 2011 we realized an average price of $3.90 per Mcf. The decrease in realized prices in the fourth quarter caused our gas sales to

be $16.9 million lower than the same period of 2011.

 Realized oil prices during 2012 averaged $89.25 per barrel, a decrease of 4% from the average price received in 2011 of $93.00 per barrel. This

decrease resulted in lower oil revenue of $43.2 million compared to 2011. For the fourth quarter of 2012 our average realized oil price was $83.04 per

barrel versus $92.76 per barrel received in the fourth quarter of 2011. The decrease in fourth quarter 2012 oil sales due to the 10% decrease in oil prices

totaled $31.4 million.

 During 2012 our average realized price for NGLs was $30.66 per barrel, which was 28% lower than the average realized price of $42.31 per barrel

received in 2011. The decrease in realized price resulted in lower NGL sales in 2012 of $81.0 million. In the fourth quarter of 2012 our average realized

price for NGLs was $28.99 per barrel compared to an average realized price of $40.29 per barrel received in the fourth quarter of 2011. The 28%

decrease in the fourth quarter 2012 NGL realized price resulted in lower NGL sales of $23.0 million compared to the 2011 fourth quarter.

 The changes in realized commodity prices were the result of overall market conditions.

 We sometimes transport, process and market third-party gas that is associated with our gas. The table below reflects our pre-tax operating margin

(revenues less direct expenses) for third party gas gathering and processing as well as the marketing margin (revenues less purchases) for marketing

third party gas.

 The lower net margins from gas gathering and processing and gas marketing activities are primarily the result of lower volumes and prices

associated with third party gas in 2012 versus 2011.

35

For the Years

Ended December 31,

2012 2011

Gas Gathering, Processing and Marketing (in thousands):

Gas gathering, processing and other revenues $ 43,042 $ 53,640

Gas gathering and processing costs (21,965) (23,327)

Gas gathering and processing margin $ 21,077 $ 30,313

Gas marketing revenues, net of related costs $ (754) $ 729

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 In 2012, our total operating costs and expenses (not including gas gathering, processing and marketing and processing costs, or income tax

expense) increased to $1.031 billion compared to $896 million in 2011. Analyses of the year-over-year differences are discussed below:

 Our 2012 DD&A expense increased 32% to $513.9 million, compared to $390.5 million in 2011. The $123.5 million increase accounted for 92%

of the aggregate increase in operating costs and expenses. DD&A per Mcfe increased by 24% to $2.24 from $1.81. The higher DD&A rate is primarily

from increasing costs of reserves added and the effect of lower prices resulting in negative reserve revisions. We expect the average DD&A rate to

increase modestly during 2013.

 Asset retirement obligation expense increased by 14% to $13.0 million in 2012. The increase resulted from higher estimated plugging and

abandonment costs in the Permian Basin and Gulf of Mexico.

 Our production costs consist of lease operating expense and workover expense as follows:

 Lease operating expense in 2012 increased by 5% compared to 2011. Higher costs were associated with compressor rentals and field employees.

The lower rate per Mcfe was primarily a function of increased production volumes and efficiencies of horizontal well operations for 2012 compared to

2011.

 Workover expense for 2012 was slightly higher than 2011. Such costs will fluctuate based on the amount of maintenance and remedial activity

planned and/or required during the period.

 Our 2012 transportation costs were relatively flat compared to 2011. Transportation costs will vary based on increases or decreases in sales

volumes, compression charges and fuel cost.

 Taxes other than income are assessed by state and local taxing authorities on production, revenues or the value of properties. Revenue based

severance taxes are the largest component of these taxes. Our 2012 taxes decreased due to lower gas and NGL prices, a reduced tax rate on Oklahoma

horizontal deep wells and a refund for taxes in prior years.

36

For the Years Ended

December 31, Variance Per Mcfe

Between

2012 2011 2012/2011 2012 2011

Operating costs and expenses (in thousands):

Depreciation, depletion and amortization (DD&A) $ 513,916 $ 390,461 $ 123,455 $ 2.24 $ 1.81

Asset retirement obligation 13,019 11,451 1,568 $ 0.06 $ 0.05

Production 258,584 247,048 11,536 $ 1.13 $ 1.14

Transportation 57,354 56,711 643 $ 0.25 $ 0.26

Taxes other than income 86,994 126,468 (39,474) $ 0.38 $ 0.59

General and administrative 54,428 45,256 9,172 $ 0.24 $ 0.21

Stock compensation 21,919 18,949 2,970 $ 0.10 $ 0.09

Gain on derivative instruments, net (245) (10,322) 10,077 N/A N/A

Other operating, net 24,961 10,263 14,698 N/A N/A

$ 1,030,930 $ 896,285 $ 134,645

For the Years

Ended December 31, Variance Per Mcfe

Between

(in thousands) 2012 2011 2012/2011 2012 2011

Lease operating expense $ 217,891 $ 208,097 $ 9,794 $ 0.95 $ 0.96

Workover expense 40,693 38,951 1,742 $ 0.18 $ 0.18

$ 258,584 $ 247,048 $ 11,536 $ 1.13 $ 1.14

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 General and administrative (G&A) costs were as follows:

 Our 2012 overall G&A cost increased 25% compared to 2011 primarily due to higher employee compensation and benefits. The increase in G&A

expense includes $3.6 million of death benefits paid to the estate of former Chairman, F.H. Merelli, as per his employment contract.

 Stock compensation expense consists of non-cash charges resulting from the issuance of restricted stock, restricted stock units and stock option

awards, net of amounts capitalized. In accordance with our stock incentive plan, such grants are periodically made to non-employee directors, officers

and other eligible employees. We have recognized non-cash stock-based compensation cost as follows:

 Expense associated with stock compensation will fluctuate based on the grant-date market value of the award and the number of shares granted.

The 2012 cost for the performance-based awards includes $3.9 million of accelerated compensation expense related to the death of former Chairman,

F.H. Merelli. See Note 8 to the Consolidated Financial Statements of this report for further discussion regarding our stock-based compensation.

 Net gain or loss on derivative instruments includes both realized gains and losses on settlements of derivative contracts and unrealized gains and

losses stemming from changes in the fair value of outstanding derivative instruments. We have not elected hedge accounting treatment for derivative

contracts. Therefore, we recognize all realized settlements and unrealized changes in fair value in operating costs and expenses.

37

For the Years Ended

December 31, Variance

Between

(in thousands) 2012 2011 2012/2011

G&A capitalized to oil and gas properties $ 66,611 $ 51,836 $ 14,775

G&A expense 54,428 45,256 9,172

$ 121,039 $ 97,092 $ 23,947

G&A expense per Mcfe $ 0.24 $ 0.21 $ 0.03

For the Years Ended

December 31, Variance

Between

(in thousands) 2012 2011 2012/2011

Performance-based restricted stock awards $ 19,066 $ 16,268 $ 2,798

Service-based restricted stock awards 12,231 11,300 931

Restricted unit awards — 34 (34)

Restricted stock and units 31,297 27,602 3,695

Stock option awards 2,889 3,518 (629)

Total stock compensation 34,186 31,120 3,066

Less amounts capitalized to oil and gas properties (12,267) (12,171) (96)

Stock compensation $ 21,919 $ 18,949 $ 2,970

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 The following table reflects our net realized and unrealized gains on derivative instruments:

 Realized and unrealized gains or losses on derivative contracts are a function of fluctuations in the underlying commodity prices and the monthly

settlement of the instruments. See Item 7A and Note 2 to the Consolidated Financial Statements of this report for additional information regarding our

derivative instruments.

 Other operating expense consists of costs related to various legal matters, most of which pertain to litigation and contract settlements and title and

royalty issues. The $14.7 million increase in expense during 2012 resulted primarily from a fourth-quarter $16.4 million accrual for a mediated royalty

litigation settlement. See Note 13 to the Consolidated Financial Statements of this report for further information regarding litigation matters.

Other (income) and expense

 Our interest expense includes interest on debt and amortization of financing costs. During 2012, debt outstanding increased to $750 million from

$405 million.

 We capitalize interest primarily on the cost of drilling and completing wells and constructing qualified assets. The higher capitalized interest in 2012

was due to higher costs on which interest was calculated.

 In connection with the retirement of our 7.125% senior notes, we recognized a $16.2 million loss on early extinguishment of debt in the second

quarter of 2012. The retirement of our 7.125% notes and the issuance of our 5.875% senior notes are described in more detail under Long-Term Debt

below.

 Components of other, net consist of miscellaneous income and expense items that will vary from period to period, including gain or loss on the

sale or value of oil and gas well equipment, income and expense associated with other non-operating activities, miscellaneous asset sales and interest

income. The $10.1 million increase in 2012 was mainly due to increased income from non-operating activities.

38

For the Years Ended

December 31, Variance

Between

(In thousands) 2012 2011 2012/2011

Realized gain on settlement of derivative instruments $ — $ 6,711 $ 6,711

Unrealized gain from changes to the fair value of the derivative

instruments 245 3,611 3,366

Gain on derivative instruments, net $ 245 $ 10,322 $ 10,077

For the Years Ended

December 31, Variance

Between

(in thousands) 2012 2011 2012/2011

Interest expense $ 49,317 $ 35,611 $ 13,706

Capitalized interest (35,174) (29,057) (6,117)

Loss on early extinguishment of debt 16,214 — 16,214

Other, net (19,864) (9,758) (10,106)

$ 10,493 $ (3,204) $ 13,697

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Income Tax Expense

 The components of our provision for income taxes are as follows:

 Our income tax expense (benefit) differs from the statutory rate of 35% due to the effects of state income taxes, the Domestic Production Activities

allowance and other permanent differences. See Note 6 to the Consolidated Financial Statements of this report for further information regarding our

income taxes.

RESULTS OF OPERATIONS

2011 compared to 2010

 Net income for the year-ended December 31, 2011was $529.9 million, or $6.15 per diluted share. For 2010 we had net income of $574.8 million,

or $6.70 per diluted share. In 2011, increased revenues from higher realized oil and NGL prices were more than offset by higher DD&A and

production expenses compared to 2010. These changes are discussed further in the analysis that follows.

For the Years

Ended December 31,

(in thousands) 2012 2011

Current benefit $ (1,489) $ (46,073)

Deferred taxes 208,216 357,622

$ 206,727 $ 311,549

Combined Federal and state effective income tax rate 36.9% 37.0%

For the Years Ended

December 31, Percent

Change

Between

2011/2010

Price / Volume Change

Commodity Sales 2011 2010 Price Volume Total

(in thousands or

as indicated)

Gas sales $ 530,334 $ 653,793 -19%$ (60,057)$(63,402)$(123,459)

Oil sales 909,344 755,618 20% 158,795 (5,069) 153,726

NGL sales 263,842 149,151 77% 46,146 68,545 114,691

Total

commodity

sales $1,703,520 $1,558,562 9%$144,884 $ 74 $ 144,958

Total gas

volume

—MMcf 120,113 132,813 -10%

Gas volume

—MMcf per

day 329.1 363.9

Average gas

price—per

Mcf $ 4.42 $ 4.92 -10%

Total oil

volume

—thousand

barrels 9,778 9,844 -1%

Oil volume

—barrels

per day 26,789 26,969

Average oil

price—per

barrel $ 93.00 $ 76.76 21%

Total NGL

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
 Commodity sales during 2011 totaled $1.7 billion, compared to $1.6 billion in 2010. The increase was a result of higher realized prices for oil and

NGLs.

39

volume

—thousand

barrels 6,236 4,272 46%

NGL volume

—barrels

per day 17,086 11,705

Average NGL

price—per

barrel $ 42.31 $ 34.91 21%

Total

equivalent

production

volumes

—MMcfe

per day 592.3 595.9 -1%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 In 2011, our aggregate production volumes were 592.3 MMcfe per day, down 1% from 595.9 Mcfe per day in 2010. Aggregate daily production

volumes for the fourth quarter of 2011 were 601.4 MMcfe, also down 1% from 604.5 MMcfe for the same period of 2010. Our Permian Basin and

Mid-Continent production volumes continue to increase as a result of our successful drilling programs. However, these increases are being offset by

decreased Gulf Coast production. The lower output from the Gulf Coast is a result of natural declines in the highly-productive wells previously drilled

near Beaumont, Texas combined with a lack of exploration success from our 2011 Gulf Coast drilling program.

 Our 2011 gas production averaged 329.1 MMcf per day, compared to 363.9 MMcf per day for 2010. The 10% decline in year over year gas

production resulted in a decrease in revenue of $63.4 million. During the fourth quarter of 2011 our daily gas production averaged 334.2 MMcf per

day, down 2% from 341.5 MMcf per day, for the same period of 2010. The decline in fourth quarter 2011 gas production resulted in $2.8 million less

revenue compared to the fourth quarter of 2010.

 Oil production for 2011 averaged 26,789 barrels per day, down slightly from production of 26,969 barrels per day in 2010. The decrease in 2011

production resulted in $5.1 million lower oil revenue for all of 2011. Our fourth quarter 2011 oil production averaged 27,431 barrels per day, or a slight

increase compared to daily oil production of 27,137 barrels for the fourth quarter of 2010. The higher production in the fourth quarter of 2011 increased

oil sales by $2.2 million.

 In 2011 our average daily NGL production volume was 17,086 barrels per day compared to 11,705 barrels per day for 2010. The 46% higher

NGL production volumes in 2011 contributed $68.5 million of additional revenue for 2011. During the fourth quarter of 2011 our average daily NGL

production was 17,107 barrels per day, up from 16,702 barrels per day during the fourth quarter of 2010. This 2% increase in NGL production

provided an additional $1.4 million of revenue in the fourth quarter of 2011. The increases in our 2011 NGL production reflect our continued focus on

drilling in more liquids-rich gas basins that produce more attractively priced NGL liquids such as ethane, propane and butane, rather than in gas basins

that produce dry gas alone.

 Our average realized gas price for 2011 fell to $4.42 per Mcf, compared to $4.92 per Mcf in 2010. The 10% decrease in prices received during

2011 resulted in lower gas sales of $60.1 million in 2011 compared to 2010 gas revenue. During the fourth quarter of 2011 our average realized gas

price decreased by 7% to $3.90 per Mcf. For the same period of 2010, we realized an average price per Mcf of $4.18. The decrease in prices received in

the fourth quarter of 2011 resulted in $8.6 million less in gas sales compared to the same period of 2010.

 Realized oil prices during 2011 averaged $93.00 per barrel, an increase of 21% over the average price received for oil in 2010 of $76.76 per barrel.

This increase resulted in an additional $158.8 million of oil sales in 2011. For the fourth quarter of 2011 our average realized oil price was $92.76 per

barrel versus $82.33 per barrel received in the fourth quarter of 2010. The increase in fourth quarter 2011 oil sales due to the 13% increase in oil prices

totaled $26.3 million.

 During 2011 our average realized price for NGLs was $42.31 per barrel, which was 21% higher than the average realized price of $34.91 per

barrel received in 2010. The increase in realized price resulted in an additional $46.1 million for NGL sales in 2011. In the fourth quarter of 2011 our

average realized price for NGLs was $40.29 per barrel compared to an average realized price of $37.59 per barrel received in the

40

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

fourth quarter of 2010. The 7% increase in the fourth quarter 2011 NGL realized price contributed $4.3 million of additional revenue.

 We sometimes transport, process and market third-party gas that is associated with our gas. In 2011, third-party gas gathering, processing and

other contributed $30.3 million of pre-tax cash operating margin (revenues less direct expenses) versus $28.5 million in 2010. Our gas marketing

margin (revenues less purchases) increased to $729 thousand in 2011 up from $459 thousand in 2010. Changes in net margins from gas gathering,

processing, marketing and other activities are the direct result of volumetric changes and overall market conditions.

 Total operating costs and expenses (not including gas gathering, marketing and processing costs, or income tax expense) increased to

$901.4 million in 2011 compared to $680.2 million in 2010. Analyses of the year over year differences are discussed below.

 For 2011 DD&A was $390.4 million, compared to $304.2 million in 2010. The $86.2 million increase in expense represents 39% of the total 2011

increase in operating costs and expenses. On a unit of production basis, the DD&A rate for 2011 was $1.81 per Mcfe, up 29% from $1.40 per Mcfe for

2010. The DD&A rate in 2010 was lower as a result of impairments to the carrying value of our oil and gas properties recorded during the last half of

2008 and the first quarter of 2009.

 Asset retirement obligation expense increased from $7.3 million in 2010 to $11.5 million in 2011. The increase was primarily due to unforeseen

modifications and/or problems that occurred at the time of actual abandonment and site restoration, which resulted in our actual costs exceeding our

estimated asset retirement obligation.

 In 2011 our production costs were $247 million ($1.14 per Mcfe) up from $194 million ($0.89 per Mcfe) during 2010. The $53.0 million increase

accounted for 24% of our total increase in operating costs and expenses.

41

For the Years

Ended December 31,

2011 2010

Gas Gathering, Processing and Marketing (in thousands):

Gas gathering, processing and other revenues $ 53,640 $ 54,662

Gas gathering and processing costs (23,327) (26,148)

Gas gathering and processing margin $ 30,313 $ 28,514

Gas marketing revenues, net of related costs $ 729 $ 459

For the Years

Ended December 31, Variance Per Mcfe

Between

2011 2010 2011/2010 2011 2010

Operating costs and expenses (in thousands):

Depreciation, depletion and amortization (DD&A) $ 390,461 $ 304,222 $ 86,239 $ 1.81 $ 1.40

Asset retirement obligation 11,451 7,322 4,129 $ 0.05 $ 0.03

Production 247,048 194,015 53,033 $ 1.14 $ 0.89

Transportation 56,711 45,982 10,729 $ 0.26 $ 0.21

Taxes other than income 126,468 121,781 4,687 $ 0.59 $ 0.56

General and administrative 45,256 48,620 (3,364) $ 0.21 $ 0.22

Stock compensation 18,949 12,353 6,596 $ 0.09 $ 0.06

(Gain) loss on derivative instruments, net (10,322) (62,696) 52,374 N/A N/A

Other operating, net 10,263 4,575 5,688 N/A N/A

$ 896,285 $ 676,174 $ 220,111

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Our production costs consist of lease operating expense and workover expense as follows:

 About half of the $43.1 million increase in our lease operating expense resulted from higher water disposal costs associated with wells coming on

line from our successful Permian Basin and Mid-Continent drilling programs. Increased costs for equipment maintenance, rentals, labor, power and fuel

also contributed to the increase in year over year lease operating expense. Workover expense for 2011 was $9.9 million higher than 2010, primarily as a

result of more activity being necessary in 2011.

 Transportation costs rose to $56.7 million ($0.26 per Mcfe) for 2011 from $46.0 million ($0.21 per Mcfe) in 2010. Transportation costs will

fluctuate based on increases or decreases in sales volumes, compression charges and fluctuation in the price of the fuel cost component. Also, in the

latter part of 2010 and continuing throughout 2011, our Mid-Continent and Permian Basin wells have experienced increases in transportation rates due

to higher contractual rates associated with new wells coming online and contracts for existing wells being renewed.

 Taxes other than income increased $4.7 million from $121.8 million in 2010 to $126.5 million in 2011. The $4.7 million increase in taxes resulted

primarily from higher realized oil and NGL prices in 2011.

 General and administrative costs were as follows:

 The decrease in G&A was mostly due to lower bonus expense in 2011.

42

For the Years

Ended December 31, Variance Per Mcfe

Between

(in thousands) 2011 2010 2011/2010 2011 2010

Lease operating expense $ 208,097 $ 164,968 $ 43,129 $ 0.96 $ 0.76

Workover expense 38,951 29,047 9,904 0.18 0.13

$ 247,048 $ 194,015 $ 53,033 $ 1.14 $ 0.89

For the Years

Ended December 31, Variance

Between

(in thousands) 2011 2010 2011/2010

G&A capitalized to oil and gas properties $ 51,836 $ 72,252 $ (20,416)

G&A expense 45,256 48,620 (3,364)

$ 97,092 $ 120,872 $ (23,780)

G&A expense per Mcfe $ 0.21 $ 0.22 $ (0.01)

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 Stock compensation expense, net consists of non-cash charges resulting from the issuance of restricted stock, restricted stock units and stock

option awards, net of amounts capitalized. We have recognized non-cash stock-based compensation cost as follows:

 Expense associated with stock compensation will fluctuate based on the grant-date market value of the award and the number of awards granted.

The $6.6 million increase in total 2011 stock compensation compared to the 2010 total expense resulted primarily from the increased price per share of

our common stock on the date of grants in 2011 compared to the grant date value of previous awards. See Note 8 to the Consolidated Financial

Statements of this report for a detailed discussion regarding our stock-based compensation.

 Our net (gain) or loss on derivative instruments includes both realized gains and losses on settlements of our derivative contracts and unrealized

gains and losses stemming from changes in the fair value of our outstanding derivative instruments.

 We estimate the fair values of these instruments based on published forward commodity price curves for the underlying commodity as of the date

of the estimate. For collars, we estimate the option value of the contract floors and ceilings using an option pricing model which takes into account

market volatility, market prices and contract terms. The fair value of our derivative instruments in an asset position include a measure of counterparty

credit risk, and the fair value of instruments in a liability position include a measure of our own nonperformance risk. These credit risks are based on

current published credit default swap rates.

 We did not elect hedge accounting treatment for derivative contracts outstanding in 2011 and 2010. Therefore we recognized all realized settlements

and unrealized changes in fair value in our operating costs and expenses. The following table reflects our net realized and unrealized (gains) and losses

on derivative instruments:

 Realized and unrealized gains or losses on derivative contracts are a function of fluctuations in the underlying commodity prices and the monthly

settlement of the instruments. In 2011 we recorded $52.4 million lower gains on our derivative instruments than in 2010, primarily due to lower realized

gas

43

For the Years Ended

December 31, Variance

Between

(in thousands) 2011 2010 2011/2010

Performance-based restricted stock awards $ 16,268 $ 9,604 $ 6,664

Service-based restricted stock awards 11,300 8,228 3,072

Restricted unit awards 34 33 1

Restricted stock and units 27,602 17,865 9,737

Stock option awards 3,518 3,826 (308)

Total stock compensation 31,120 21,691 9,429

Less amounts capitalized to oil and gas properties (12,171) (9,338) (2,833)

Stock compensation $ 18,949 $ 12,353 $ 6,596

For the Years

Ended December 31, Variance

Between

(In thousands) 2011 2010 2011/2010

Realized (gain) on settlement of derivative instruments $ (6,711) $ (52,098) $ 45,387

Unrealized (gain) from changes to the fair value of the derivative

instruments (3,611) (10,598) 6,987

(Gain) on derivative instruments, net $ (10,322) $ (62,696) $ 52,374

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

prices in 2011. The $52.4 million of lower gains accounted for 24% of our total increase in operating costs and expenses. See Note 2 to the

Consolidated Financial Statements in this report for a complete discussion of our derivative instruments.

 Other operating, net expense consists of costs related to various legal matters, most of which pertain to litigation and contract settlements and title

and royalty issues. Other operating, net increased from $4.6 million in 2010 to $10.3 million for 2011. Expenses for 2010 were significantly lower than

in 2011 due to the favorable resolution of items in 2010 that had been accrued in prior years. See Note 13, Commitments and Contingencies, in this

report for further information regarding litigation matters.

Other (income) and expense

 Our interest expense includes interest on outstanding borrowings, amortization of financing costs and miscellaneous interest expense. Our 7.125%

senior notes accounted for 70% and 68% of our 2011 and 2010 interest expense, respectively. Capitalized interest remained relatively flat for both 2011

and 2010.

 On July 1, 2010, certain holders of our floating rate convertible notes elected to convert their notes. The holders received $20.5 million and

408,450 shares of common stock. We recorded a gain of $3.8 million on the settlement of the notes.

 Components of other, net consist of miscellaneous income and expense items that will vary from period to period, including, gain or loss on the

sale or value of oil and gas well equipment, other miscellaneous asset sales, income and expense from other non-operating activities and interest income.

The $3.8 million increase in 2011 was mainly due to sales of oil and gas well equipment and supplies.

Income Tax Expense

 The components of our provision for income taxes are as follows:

 The effective tax rate of 37% for 2011 differs from the statutory rate of 35% due to the effects of state income taxes, the Domestic Production

Activities allowance and other permanent differences. See Note 6, Income Taxes, in this report for further information.

44

For the Years

Ended December 31, Variance

Between

(In thousands) 2011 2010 2011/2010

Interest expense $ 35,611 $ 36,613 $ (1,002)

Capitalized interest (29,057) (29,215) 158

Loss on early extinguishment of debt — (3,776) 3,776

Other, net (9,758) (5,992) (3,766)

$ (3,204) $ (2,370) $ (834)

For the Years

Ended December 31,

(In thousands) 2011 2010

Current taxes (benefit) $ (46,073) $ 46,337

Deferred taxes 357,622 292,612

$ 311,549 $ 338,949

Combined Federal and state effective income tax rate 37.0% 37.1%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

LIQUIDITY AND CAPITAL RESOURCES

Overview

 Our liquidity is highly dependent on the commodity price we receive for the oil, gas and NGLs we produce. Commodity prices are market driven,

have been very volatile and therefore, we cannot predict future commodity prices. Prices received for production heavily influence our revenue, cash

flow, profitability, access to capital and future rate of growth.

 Natural gas prices have been in decline since year-end 2011, the result of increasing supply coupled with lower demand caused by exceptionally

mild winters. Oil and NGL prices have fluctuated during 2012 due to supply and demand factors, seasonality and other geopolitical and economic

factors. It is likely that future prices for these commodities will continue to fluctuate.

 We deal with volatility in commodity prices by maintaining flexibility in our capital investment program. Based on current commodity prices, our

2013 E&D capital expenditures are expected to range from $1.4 - 1.5 billion. Nearly all the capital is directed towards oil and liquids-rich gas

opportunities in the Permian Basin and Cana-Woodford shale play. Actual amounts invested will depend on our calculated rates of return.

 Our E&D expenditures have generally been funded by cash flow provided by operating activities (operating cash flow). During 2012, E&D

expenditures of $1.6 billion were largely funded by operating cash flow and the sale of $306 million of non-strategic assets. We expect our 2013 E&D

capital expenditures to be funded by operating cash flow and long-term debt. We have hedged a portion of our 2013 oil production to protect our

operating cash flow for reinvestment.

 From time to time we consider acquisition opportunities, however, the timing and size of acquisitions is unpredictable.

 At December 31, 2012, our long-term debt consisted of $750 million of 5.875% senior notes. Debt to total capitalization was 18%. The

reconciliation of debt to total capitalization, which is a non-GAAP measure, is long-term debt ($750 million) divided by long-term debt plus

stockholders' equity ($4.224 billion). Management believes that this non-GAAP measure is useful information as it is a common statistic used in the

investment community.

 We believe that our operating cash flow and other capital resources will be adequate to meet our needs for planned capital expenditures, working

capital, debt servicing and dividend payments in 2013 and beyond.

Sources and Uses of Cash

 Our primary sources of liquidity and capital resources are operating cash flow, borrowings under our bank credit facility, asset sales and public

offerings of debt securities. Our primary uses of funds are exploration, development, leasehold and property acquisition, debt service and common

stock dividends.

45

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 The following table presents our sources and uses of cash and cash equivalents from 2010 to 2012. Capital expenditures are presented on a cash

basis. These amounts differ from capital expenditures (including accruals) that are referred to elsewhere in this report.

Analysis of Cash Flow Changes (See the Consolidated Statements of Cash Flows)

 Cash flow provided by operating activities for 2012 was $1.2 billion compared to $1.3 billion for 2011 and $1.1 billion for 2010. Lower

commodity prices were responsible for most of the decrease in 2012 and resulted in $307 million less revenue. This was partially offset by a

$185 million increase from higher oil and NGLs production in 2012. The increase in 2011 over 2010 was due to higher realized prices for oil and

NGLs.

 Cash flow used in investing activities for both 2012 and 2011 was $1.4 billion. For 2010, cash flow used in investing activities was $978 million.

Changes in cash flow used in investing activities generally result from changes in our capital expenditures and acquisitions net of asset sales. In 2012,

we had E&D and other capital expenditures of $1.7 billion which were partially offset by proceeds from asset sales of $313 million. For 2011, E&D

expenditures and other capital expenditures were $1.7 billion with proceeds from asset sales of $229 million. In 2010, E&D and other capital

expenditures were $1.0 billion which were partially offset by asset sales of $34 million.

 During 2012, net cash flow provided by financing activities was $289 million compared to $25 million in 2011. Other long-term debt increased

$750 million and we received proceeds of $11.4 million from issuance of common stock. These increases were offset by debt payments of

$419 million, $40 million of dividends paid, and financing costs of $14 million. We issued $750 million of 5.875% senior notes in 2012 and used the

proceeds to retire the $350 million 7.125% senior notes outstanding and pay down bank debt. In 2011, our net cash inflow was the result of net bank

borrowing of $55 million plus $10.4 million from the issuance of common stock, less $32.6 million of dividend payments and $7.3 million of financing

costs. Net cash used in financing activities was $41 million in 2010. Cash inflows of $29 million from the issuance of common stock were more than

offset by debt repayments of $44 million and dividend payments of $25 million during the year.

46

For the Years Ended December 31,

(in thousands) 2012 2011 2010

Sources of cash and cash equivalents:

Operating cash flow $ 1,192,764 $ 1,292,275 $ 1,130,432

Sales of oil and gas and other assets 312,622 229,355 34,075

Net increase in bank debt — 55,000 —

Increase in other long-term debt 750,000 — —

Issuance of common stock and other 11,433 10,411 28,758

Total sources of cash and cash equivalents 2,266,819 1,587,041 1,193,265

Uses of cash and cash equivalents:

Oil and gas expenditures (1,662,707) (1,562,159) (959,751)

Other capital expenditures (64,987) (96,642) (51,882)

Net decrease in bank debt (55,000) — (25,000)

Decrease in other long-term debt (363,595) — (19,450)

Financing costs incurred (13,821) (7,379) (101)

Dividends paid (39,577) (32,581) (25,499)

Total uses of cash and cash equivalents (2,199,687) (1,698,761) (1,081,683)

Net increase (decrease) in cash and cash equivalents $ 67,132 $ (111,720) $ 111,582

Cash and cash equivalents at end of year $ 69,538 $ 2,406 $ 114,126

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Reconciliation of Adjusted Cash Flow from Operations

 Management believes that the non-GAAP measure of adjusted cash flow from operations is useful information for investors. It is accepted by the

investment community as a means of measuring the company's ability to fund its capital program without reflecting fluctuations caused by changes in

current assets and liabilities (which are included in the GAAP measure of cash flow from operating activities). It is also used by professional research

analysts in providing investment recommendations pertaining to companies in the oil and gas exploration and production industry.

Capital Expenditures

 The following table sets forth certain historical information regarding capitalized expenditures for oil and gas acquisitions, exploration and

development activities and property sales:

 Capital expenditures in the table above are presented on an accrual basis. Additions to property and equipment in the Consolidated Statements of

Cash Flows in this report reflect capital expenditures on a cash basis, when payments are made.

 In 2012, our E&D expenditures were $1.62 billion compared to $1.58 billion in 2011 and $1.0 billion in 2010.

 Of total 2012 expenditures, 55% were for projects in the Permian Basin primarily in the Delaware Basin of southeast New Mexico and West

Texas and approximately 41% were in the Mid-Continent region, mostly in the Cana-Woodford shale play.

47

For the Year Ended December 31,

(in thousands) 2012 2011 2010

Net cash provided by operating activities $ 1,192,764 $ 1,292,275 $ 1,130,432

Change in operating assets and liabilities (58,049) 22,686 57,699

Adjusted cash flow from operations $ 1,134,715 $ 1,314,961 $ 1,188,131

For Years Ended December 31,

(in thousands) 2012 2011 2010

Acquisitions:

Proved $ 2,645 $ 23,071 $ 15,220

Unproved 30,870 22,327 24,552

33,515 45,398 39,772

Exploration and development:

Land & seismic 121,960 164,285 128,283

Exploration 74,034 64,157 103,671

Development 1,426,918 1,351,617 766,980

1,622,912 1,580,059 998,934

Property sales (305,862) (117,344) (28,235)

$ 1,350,565 $ 1,508,113 $ 1,010,471

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 The following table reflects wells drilled by region:

 Full year 2013 E&D capital expenditures are expected to range from $1.4 - 1.5 billion, most of which will be directed towards drilling oil and

liquids-rich gas wells in the Permian Basin and Cana-Woodford shale play. We expect our 2013 E&D capital expenditures to be funded from cash flow

and long-term debt. The timing of capital expenditures and the receipt of cash flows do not necessarily match causing us to borrow and repay funds

under our credit arrangement throughout the year.

 As has been our historical practice, we regularly review our capital expenditures throughout the year and will adjust our investments based on

changes in commodity prices, service costs and drilling success. We have the flexibility to adjust our capital expenditures based upon market conditions.

 We made property acquisitions of $33.5 million during 2012, most of which were in the Permian Basin. Property acquisitions totaled

approximately $45.4 million in 2011and $39.8 in 2010 which were used to purchase additional interests in the Cana-Woodford shale play.

 In 2012, we sold interests in non-core oil and gas assets for $306 million. Of this total, $290 million, which occurred in the fourth quarter, was

related to non-core oil and gas assets located in Texas.

 In August 2011, we sold all of our interests in assets located in Sublette County, Wyoming for $195.5 million (including purchase price

adjustments). The assets sold principally consisted of a gas processing plant under construction and 210 Bcf of proved undeveloped gas reserves. No

gain or loss was recognized on the sale of proved reserves as the disposition did not significantly alter the relationship between capitalized costs and

proved reserves. During 2011, we also sold $33.3 million of various non-core interests including assets in Lea County, New Mexico and Willacy

County, Texas. Various interests in oil and gas properties were sold during 2010 for $28.2 million, most of which were non-core Mississippi assets.

 We intend to continue to actively evaluate acquisitions and dispositions relative to our property holdings, particularly in our core areas of operation.

 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. 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.

 Our 2012 exploration and development drilling program is discussed in more detail in Exploration and Development Activity Overview under

Item 1 of this report.

48

For the Years

Ended

December 31,

2012 2011

Gross wells

Permian Basin 182 140

Mid-Continent 167 180

Gulf Coast / Other 3 11

352 331

Net wells

Permian Basin 122 100

Mid-Continent 69 64

Gulf Coast / Other 1 10

192 174

% Gross wells completed as producers 95% 96%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Financial Condition

 Future cash flows and the availability of financing are subject to a number of variables including success in finding and producing new reserves,

production from existing wells and realized commodity prices. To meet capital and liquidity requirements, we rely on certain resources, including cash

flows from operating activities, bank borrowings and access to capital markets. We periodically use our credit facility to finance our working capital

needs.

 During 2012, our total assets increased $948 million to $6.3 billion, up from $5.4 billion at December 31, 2011. The increase was primarily due to

a $879 million increase in net oil and gas properties.

 Total liabilities at year-end 2012 increased to $2.8 billion, up $604 million from the $2.2 billion reported at year-end 2011. This was mainly due to

an increase of $345 million in long-term debt and a $218 million increase in deferred income taxes.

 On December 31, 2012, stockholders' equity totaled $3.5 billion, up $400 million from December 31, 2011. The increase is mostly related to our

2012 net income.

Dividends

 A quarterly cash dividend has been paid to shareholders every quarter since the first quarter of 2006. In February 2012, the quarterly dividend was

increased to $0.12 per share from $0.10 per share. Future dividend payments will depend on our level of earnings, financial requirements and other

factors considered relevant by the Board of Directors.

Working Capital Analysis

 Our working capital fluctuates primarily as a result of our exploration and development activities, realized commodity prices and our operating

activities. Working capital is also impacted by income tax receivables or payables, property sales, accrued G&A and changes in inventory balances.

 Working capital decreased $17.3 million from a deficit of $158.4 million at December 31, 2011, to a deficit of $175.7 million at December 31,

2012.

 The decrease in working capital was a result of the following:

• A $47.2 million decrease in our income tax receivable. 

• Operations-related accounts payable and accrued liabilities increased by $48.3 million. 

• Operations related accounts receivable decreased by $9.2 million.

Working capital decreases were partially offset by:

• An increase in cash and cash equivalents of $67.1 million, primarily the result of property sales which closed in December 2012. 

• A decrease of $18.5million in accrued liabilities related to our E&D expenditures.

 Accounts receivable are a major component of working capital and include a diverse group of companies comprised of major energy companies,

pipeline companies, local distribution companies and other end-users. The collection of receivables during the periods presented has been timely.

Historically, losses associated with uncollectible receivables have not been significant.

49

2012 2011 2010

Dividend declared (in millions) $ 41.3 $ 34.3 $ 27.2

Dividend per share $ 0.48 $ 0.40 $ 0.32

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Long-Term Debt

 Debt at December 31, 2012, and December 31, 2011, consisted of the following:

Bank Debt

 We have a five-year senior unsecured revolving credit facility (Credit Facility) that matures July 14, 2016. The Credit Facility provides for a

borrowing base of $2 billion. Aggregate commitments from our lenders increased from $800 million to $1.0 billion in July 2012.

 Under our Credit Facility, the borrowing base is determined at the discretion of lenders based on the value of our proved reserves. The next regular

annual redetermination is April 15, 2013.

 As of December 31, 2012, we had no bank debt outstanding. We had letters of credit outstanding of $2.5 million leaving an unused borrowing

availability of $997.5 million. During 2012, we had average daily bank debt outstanding of $96.3 million, compared to $17.8 million in 2011. Our

highest amount of bank borrowings outstanding during 2012 was $296 million in December. During 2011, the highest amount of outstanding bank

borrowings was $149 million in July.

 At our option, borrowings under the Credit Facility may bear interest at either (a) LIBOR plus 1.75-2.5%, based on our leverage ratio; or (b) the

higher of (i) a prime rate, (ii) the federal funds effective rate plus 0.50%, or (iii) adjusted one-month LIBOR plus 1.0% plus, in each case, an additional

0.75-1.5%, based on our leverage ratio.

 The Credit Facility also has financial covenants that include the maintenance of current assets (including unused bank commitments) to current

liabilities of greater than 1.0 to 1.0. We also must maintain a leverage ratio of total debt to earnings before interest expense, income taxes and noncash

items (such as DD&A expense, unrealized gains and losses on commodity derivatives, ceiling test writedowns and goodwill impairments) of not more

than 3.5 to 1.0. Other covenants could limit our ability to incur additional indebtedness, pay dividends, repurchase our common stock or sell assets. As

of December 31, 2012, we were in compliance with all of the financial and nonfinancial covenants.

5.875% Notes due 2022

 In April 2012, we issued $750 million of 5.875% senior notes due May 1, 2022, with interest payable semiannually in May and November. The

notes were sold to the public at par. These notes are governed by an indenture containing certain covenants, events of default and other restrictive

provisions. We may redeem the notes, in whole or in part, at any time on or after May 1, 2017, at a redemption price of 102.938% of the principal

amount as of May 1, 2017, declining to 100% on May 1, 2020 and thereafter.

 Net proceeds from the offering approximated $737 million, after underwriting discounts and offering costs. We used a portion of the net proceeds

to retire our 7.125% senior notes. The remaining proceeds were used for general corporate purposes including repayment of $232 million outstanding

under our Credit Facility.

50

(in thousands) 2012 2011

Bank debt $ — $ 55,000

7.125% Senior Notes due 2017 — 350,000

5.875% Senior Notes due 2022 750,000 —

Total long-term debt $ 750,000 $ 405,000

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

7.125% Notes due 2017

 In May 2007, we issued $350 million of 7.125% senior unsecured notes at par which were scheduled to mature May 1, 2017. On March 22, 2012,

we commenced a cash tender offer (Tender Offer) to purchase all of the outstanding 7.125% senior notes.

 Under the terms of the Tender Offer, holders who tendered their notes on or prior to April 4, 2012, received $1,035.63 per $1,000.00 in principal

amount of notes tendered plus a consent payment of $3.75 per $1,000.00 in principal amount of notes tendered. As of April 18, 2012, a total of

$300,163,000 of notes had been redeemed. In May 2012, the remaining notes were redeemed at 103.563% of the principal amount. We recognized a

$16.2 million loss on early extinguishment of debt during the second quarter of 2012.

 In conjunction with the Tender Offer, holders who tendered their notes were deemed to consent to proposed amendments to eliminate or modify

certain covenants and events of default and other provisions contained in the indenture governing the 7.125% senior notes.

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 December 31,

2012, our material off-balance sheet arrangements included operating lease agreements which are customary in the oil and gas industry.

Contractual Obligations and Material Commitments

 At December 31, 2012, we had contractual obligations and material commitments as follows:

(1) See Item 3: Interest Rate Risk for more information regarding fixed and variable rate debt. 

(2) We have drilling commitments of approximately $206.1 million consisting of obligations to finish drilling and completing wells in progress at

December 31, 2012. We also have various commitments for drilling rigs as well as certain service contracts. The total minimum expenditure

commitments under these agreements are $6.6 million. 

(3) We have projects in Oklahoma, New Mexico, and Texas where we are constructing gathering facilities and pipelines. At December 31, 2012,

we had commitments of $1.7 million relating to this construction. 

(4) We have not included the long term asset retirement obligations because we are not able to precisely predict the timing of these amounts. 

(5) Other liabilities include the fair value of our liabilities associated with our benefit obligations and other miscellaneous commitments.

51

Payments Due by Period

Contractual obligations: Total

Less than 1

Year 1 - 3 Years 4 - 5 Years

More than 5

Years

(in thousands)

Long-term debt(1) $ 750,000 $ — $ — $ — $ 750,000

Fixed-Rate interest

payments(1) 418,594 44,063 88,125 88,125 198,281

Operating leases 131,571 13,486 17,890 19,431 80,764

Drilling

commitments(2) 212,762 212,762 — — —

Gathering facilities

and pipelines(3) 1,708 1,708 — — —

Asset retirement

obligation 185,138 51,147 —(4) —(4) —(4)

Other liabilities(5) 59,420 15,368 28,384 — 15,668

Firm Transportation 1,620 986 599 35 —

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

 At December 31, 2012, we had firm sales contracts to deliver approximately 26.8 Bcf of natural gas over the next 16 months. In total, our financial

exposure would be approximately $86.4 million should this gas not be delivered. Our exposure will fluctuate with price volatility and actual volumes

delivered, however, we believe Cimarex has no financial exposure from these contracts based on our current proved reserves and production levels. In

the normal course of business we have various other delivery commitments which are not material individually or in the aggregate. All of the noted

commitments were routine and were made in the normal course of our business.

 Based on current commodity prices and anticipated levels of production, we believe that estimated net cash generated from operations and amounts

available under our existing bank Credit Facility will be adequate to meet future liquidity needs.

2013 Outlook

 Our 2013 E&D capital investment is presently expected to be in the range of $1.4-1.5 billion. Nearly all of this capital will be used for drilling oil

and liquids-rich gas wells in the Permian Basin and Cana-Woodford shale play. We have a large inventory of drilling opportunities, limited lease

expirations and few service commitments. We regularly review our capital expenditures and may adjust our investments based on changes in

commodity prices, service costs and drilling success. Actual amounts invested will depend on our calculated rates of return which are significantly

influenced by commodity prices.

 Though there are a variety of factors that could curtail, delay or even cancel some of our planned operations, we believe our projected program is

likely to occur. The majority of projects are in hand, drilling rigs are being scheduled and the historical results of our drilling efforts warrant pursuit of

the projects.

 Production for 2013 is projected to be in the range of 675 - 705 MMcfe per day, an 8 - 13% increase over 2012. Liquids are projected to account

for 51% of total equivalent production, up from 48% in the prior year. Combined Mid-Continent and Permian Basin production volumes are projected

to grow 11 - 15% in 2013, averaging between 652 - 672 MMcfe per day. Gulf Coast volumes are projected to average 23 - 32 MMcfe per day.

 Revenues from oil, gas and NGL sales are dependent not only on the level actually produced, but also on the price received. During 2012, realized

prices averaged $89.25 per barrel of oil , $2.88 per Mcf of gas and $30.66 per barrel of NGL. Commodity prices can be volatile and the possibility of

2013 realized prices varying from those received in 2012 is high.

 Certain expenses for 2013 on a per Mcfe basis are currently estimated as follows:

52

2013

Production expense $1.05 - $1.17

Transportation expense 0.27 - 0.32

DD&A and asset retirement obligation 2.40 - 2.55

General and administrative 0.22 - 0.28

Taxes other than income (% of oil and gas revenue) 6.0% - 6.5%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

 Discussion and analysis of our financial condition and results of operation are based on our Consolidated Financial Statements, which have been

prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of these financial

statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses.

 A complete list of our significant accounting policies are described in Note 1 to our Consolidated Financial Statements included in this report. We

have identified certain of these policies as being of particular importance to the portrayal of our financial position and results of operations and which

require the application of significant judgment by our management.

 We analyze and base our estimates on historical experience and various other assumptions that we believe to be reasonable under the

circumstances. Actual results may differ from these estimates. We believe the following to be our most critical accounting policies and estimates that

involve significant judgments and discuss the selection and development of these policies and estimates with our Audit Committee.

Oil and Gas Reserves

 The process of estimating quantities of oil and gas reserves is complex, requiring significant decisions in the evaluation of all available geological,

geophysical, engineering and economic data. The data for a given field may also change substantially over time due to numerous factors including, but

not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying

economic conditions. As a result, material revisions to existing reserve estimates may occur from time to time. Although every reasonable effort is made

to ensure that our reserve estimates represent the most accurate assessments possible, subjective decisions and available data for our various fields make

these estimates generally less precise than other estimates included in financial statement disclosures.

 At year-end 2012, 20% of our total proved reserves are categorized as PUDs. All of the PUD reserves are related to the Cana-Woodford shale

play. Our reserve engineers review and revise these reserve estimates regularly, as new information becomes available.

 We use the units-of-production method to amortize the cost associated with our oil and gas properties. Changes in estimates of reserve quantities

and commodity prices will cause corresponding changes in depletion expense, or in some cases, a full cost ceiling limitation charge in the period of the

revision.

 The following table presents information regarding reserve revisions largely resulting from items we do not control, such as revisions due to price,

and revisions resulting from better information about production history, well performance and production costs.

 Approximately 72 Bcfe of the 257.3 Bcfe net negative revisions during 2012 relate to production performance of certain wells recently drilled in

our Cana-Woodford shale project. PUD reserve additions in extensions and discoveries for 2012 now reflect revised expectations of future production

performance. The remainder of the net negative revision primarily resulted from decreases in prices (91 Bcfe), increases

53

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

in operating expenses (21 Bcfe) which shortened the economic lives, adjustments to previously booked PUD reserves (25 Bcfe) and the removal of

PUD locations due to altered future drilling plans (42 Bcfe).

 See Note 15, Unaudited Supplemental Oil and Gas Disclosures in this report for additional reserve data.

Full Cost Accounting

 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. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead

related to exploration and development activities and other costs incurred for the purpose of finding oil and gas reserves. Salaries and benefits paid to

employees directly involved in the exploration and development of properties, as well as other internal costs that can be directly identified with

acquisition, exploration and development activities are also capitalized. Under the full cost method, no gain or loss is recognized upon the disposition of

oil and gas properties unless such disposition would significantly alter the relationship between capitalized costs and proved reserves.

 Companies that follow the full cost accounting method are required to make a quarterly "ceiling test" calculation. This test ensures that total

capitalized costs for oil and gas properties (net of accumulated DD&A and deferred income taxes) do not exceed the sum of the present value

discounted at 10% of estimated future net cash flows from proved reserves, the cost of properties not being amortized, the lower of cost or estimated

fair value of unproven properties included in the costs being amortized and all related tax effects. We currently do not have any unproven properties

being amortized. Revenue calculations in the reserves are based on the unweighted average first-day-of-the-month commodity price for the prior twelve

months. Changes in proved reserve estimates (whether based upon quantity revisions or commodity price) will cause corresponding changes to the full

cost ceiling limitation. If net capitalized costs subject to amortization exceed this limit, the excess would be expensed. Recorded impairment of oil and

gas properties is not reversible.

 Quarterly and annual ceiling tests are primarily impacted by commodity prices, reserve quantities added and produced, overall exploration and

development costs and depletion expense. As of December 31, 2012, the calculated value of the ceiling limitation exceeded the carrying value of our oil

and gas properties subject to the test, therefore, no impairment was necessary. However, the amount of the excess has declined approximately 87%

since December 31, 2011. As of December 31, 2012, a decline of 3% in the value of the ceiling limitation would have caused an impairment. If negative

trends continue, we may incur impairment charges in the future, which could have a material adverse effect on our results of operations in the period

taken.

 Depletion of proved oil and gas properties is computed on the units-of-production method, whereby capitalized costs, including future

development costs and asset retirement obligations, are amortized over total estimated proved reserves. Changes in our estimate of proved reserve

quantities and commodity prices will cause corresponding changes in depletion expense in periods subsequent to these changes. The capitalized costs of

unproved properties, including those in wells in progress, are excluded from the costs

54

Years Ended December 31,

2012 2011 2010

Bcfe

Change

Percent

of total

Reserves

Bcfe

Change

Percent

of total

Reserves

Bcfe

Change

Percent

of total

Reserves

Revisions resulting from price changes (91.4) (4.47)% 3.8 0.20% 44.8 2.92%

Other changes in estimates (165.9) (8.11)% (11.0) (0.58)% 103.6 6.75%

Total (257.3) (12.58)% (7.2) (0.38)% 148.4 9.67%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

being amortized. We do not have major development projects that are excluded from costs being amortized. On a quarterly basis, we evaluate excluded

costs for inclusion in the costs to be amortized resulting from the determination of proved reserves or impairments. To the extent that the evaluation

indicates these properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Expenditures for maintenance and

repairs are charged to production expense in the period incurred.

Goodwill

 Goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired and is tested for

impairment at least annually. In 2012, we adopted FASB Accounting Standards Update No. 2011-08: Intangibles—Goodwill and Other (Topic 350):

Testing Goodwill for Impairment (ASU 2011-08). ASU 2011-08 allows an entity to first assess qualitative factors to determine whether it is more

likely than not (with a greater than 50% threshold) that the fair value of a reporting unit is less than its carrying amount as a basis for determining

whether it is necessary to perform the two-step goodwill impairment test. If goodwill is determined to be impaired then it is written down to a calculated

fair value by charging the impairment to expense.

 We evaluate our goodwill for impairment in the fourth quarter of each year or whenever events or changes in circumstances indicate the possibility

that goodwill may be impaired. Based upon our assessment at December 31, 2012, goodwill was not impaired. However, it is possible that goodwill

could become impaired in the future if commodity prices or other economic factors become less favorable. A goodwill impairment charge would have

no effect on liquidity or our capital resources, but could adversely affect our results of operations in the period incurred.

 During the fourth quarter of 2012, we determined that our goodwill was overstated due to certain errors in the calculation of net deferred tax

liability in conjunction with our 2005 business combination. We have concluded this is an immaterial correction of error and we have restated the

accompanying balance sheet as of December 31, 2005, to decrease both goodwill and deferred income tax liability by $71.2 million. The errors were

noncash and had no effect on our statements of income and comprehensive income, cash flow or stockholders' equity.

Contingencies

 A provision for contingencies is charged to expense when the loss is probable and the cost can be reasonably estimated. Determining when

expenses should be recorded for these contingencies and the appropriate amounts for accrual is a complex estimation process that includes subjective

judgment. In many cases, this judgment is based on interpretation of laws and regulations, which can be interpreted differently by regulators and/or

courts of law. We closely monitor known and potential legal, environmental, and other contingencies periodically to determine if we should record

losses.

 At December 31, 2012, we have not made any accruals related to environmental remediation costs. However, we may be required to make such

estimates in future periods if applicable laws and regulations change or if the interpretation or administration of laws and regulations change. Other

factors, such as unanticipated construction problems or identification of areas of contaminated soil or groundwater, could also cause us to accrue for

such costs.

Hitch Enterprises, Inc. et al. v. Cimarex Energy Co. et al.

 On December 11, 2012, Cimarex entered into a preliminary resolution of the Hitch Enterprises, Inc., et al. v. Cimarex Energy Co., et al. (Hitch)

litigation matter for $16.4 million. Hitch was filed as a statewide royalty putative class-action in the Federal District Court in Oklahoma City, Oklahoma.

The settlement was reached at a mediation, which occurred after the parties began to exchange information, including damage analyses, on

November 16, 2012. The Court has entered an order preliminarily approving the

55

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

parties' settlement. The deadline for putative class members to opt out of the settlement class was February 15, 2013, and less than 1/2% of the class

members opted out. The Court will hold the settlement fairness hearing on March 22, 2013. In the fourth quarter of 2012, we accrued $16.4 million for

this matter.

H.B. Krug, et al. versus H&P

 In January 2009, the Tulsa County District Court issued a judgment totaling $119.6 million in the H.B. Krug, et al. versus Helmerich & Payne,

 Inc. (H&P) case. This lawsuit originally was filed in 1998 and addressed H&P's conduct pertaining to a 1989 take-or-pay settlement, along with

potential drainage and other related issues. Pursuant to the 2002 spin-off transaction to shareholders of H&P, by which Cimarex became a publiclytraded entity, Cimarex assumed the assets and liabilities of H&P's exploration and production business, including this lawsuit. In 2008 we recorded a

litigation expense of $119.6 million for this lawsuit. We have accrued additional post-judgment interest and costs during the appeal of the District

Court's judgment.

 On August 18, 2011, the Oklahoma Court of Appeals issued an Opinion regarding the Krug litigation. The Oklahoma Court of Appeals reversed

and remanded the $112.7 million disgorgement of profits award, holding the District Court erred in failing to make the required findings of fact and

conclusions of law. In all other respects, the Court of Appeals affirmed the judgment, including damages of $6.845 million. On February 13, 2012 the

Oklahoma Supreme Court granted Cimarex's Petition for Certiorari, which requested a review of the affirmed portion of the judgment. We are awaiting

a ruling from the Oklahoma Supreme Court, and the final outcome cannot be determined at this time. If the District Court's original judgment is

ultimately affirmed in its entirety, the $119.6 million, plus the then-determined amount of post-judgment interest and costs would become payable.

 In the normal course of business, we have other various litigation matters. We assess the probability of estimable amounts related to litigation

matters in accordance with guidance established by the Financial Accounting Standards Board (FASB) and adjust our accruals accordingly. Though

some of the related claims may be significant, the resolution of them we believe, individually or in the aggregate, would not have a material adverse

effect on our financial condition or results of operations. See Note 13 of this Report for additional information regarding our contingencies.

Asset Retirement Obligation

 Our asset retirement obligation represents the estimated present value of the amount we will incur to retire long-lived assets at the end of their

productive lives, in accordance with applicable state laws. Our asset retirement obligation is determined by calculating the present value of estimated

cash flows related to the liability. The retirement obligation is recorded as a liability at its estimated present value as of inception with an offsetting

increase in the carrying amount of the related long-lived asset. Periodic accretion of discount of the estimated liability is recorded as an expense in the

income statement. The cost of the tangible asset, including the asset retirement cost, is depreciated over the useful life of the asset.

 Asset retirement liability is determined using significant assumptions including current estimates of plugging and abandonment costs, annual

inflation of these costs, the productive lives of assets and our risk-adjusted interest rate. Changes in any of these assumptions can result in significant

revisions to the estimated asset retirement obligation. Because of the subjectivity of assumptions, the costs to ultimately retire our wells may vary

significantly from prior estimates. See Note 4 to the Consolidated Financial Statements of this Report for additional information regarding our asset

retirement obligations.

Recently Issued Accounting Standards

 No significant accounting standards applicable to Cimarex have been issued during the year ended December 31, 2012.

56

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK 

 Market risk refers to the risk of loss arising from adverse changes in commodity prices and interest rates. The disclosures are not meant to be

precise indicators of expected future losses but rather indicators of reasonably possible losses.

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 NGLs has been volatile and unpredictable.

 To manage exposure to commodity prices, we periodically hedge a portion of the price risk associated with future oil and gas production. The goal

of these arrangements is to decrease our exposure to price volatility thereby increasing the predictability of future cash flow. However, hedges can also

limit potential gains if oil and gas prices rise above the price established by the hedges.

 At December 31, 2012, we had no hedges in place. Subsequent to December 31, 2012, we entered into oil collars and swaps. See Note 2 to the

Consolidated Financial Statements of this report for additional information regarding our derivative instruments.

 Counterparty credit risk did not have a significant effect on our cash flow calculations and commodity derivative valuations. This is primarily

because we have mitigated our exposure to any single counterparty by contracting with numerous counterparties and because our derivative contracts

are held with "investment grade" counterparties that are also part of our credit facility.

Interest Rate Risk

 At December 31, 2012, our long-term debt consisted of $750 million in 5.875% senior notes that will mature May 1, 2022. Because all of our

long-term debt is at a fixed rate, we consider our interest rate exposure to be minimal. The sensitivity analysis for interest rate risk excludes accounts

receivable, accounts payable and accrued liabilities because of the short-term nature of such instruments. See Note 3 and Note 5 to the Consolidated

Financial Statements of this report for additional information regarding debt.

57

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA 

CIMAREX ENERGY CO.

INDEX TO FINANCIAL STATEMENTS AND SUPPLEMENTAL SCHEDULES

 All other supplemental information and schedules have been omitted because they are not applicable or the information required is shown in the

consolidated financial statements or related notes thereto.

58

Page

Report of Independent Registered Public Accounting Firm for the years ended December 31, 2012, 2011, and

2010 59

Consolidated balance sheets as of December 31, 2012 and 2011 60

Consolidated statements of income and comprehensive income for the years ended December 31, 2012, 2011,

and 2010 61

Consolidated statements of cash flows for the years ended December 31, 2012, 2011, and 2010 62

Consolidated statements of stockholders' equity for the years ended December 31, 2012, 2011, and 2010 63

Notes to consolidated financial statements 64

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Report of Independent Registered Public Accounting Firm

The Board of Directors and Stockholders

Cimarex Energy Co.:

 We have audited the accompanying consolidated balance sheets of Cimarex Energy Co. and subsidiaries (the Company) as of December 31, 2012

and 2011, and the related consolidated statements of income and comprehensive income, stockholders' equity, and cash flows for each of the years in

the three-year period ended December 31, 2012. These consolidated financial statements are the responsibility of the Company's management. Our

responsibility is to express an opinion on these consolidated financial statements based on our audits.

 We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An

audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing

the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We

believe that our audits provide a reasonable basis for our opinion.

 In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Cimarex

Energy Co. and subsidiaries as of December 31, 2012 and 2011, and the results of their operations and their cash flows for each of the years in the

three-year period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles.

 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the Company's

internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control—Integrated Framework issued by

the Committee of Sponsoring Organizations of the Treadway Commission (COSO), and our report dated February 26, 2013 expressed an unqualified

opinion on the effectiveness of the Company's internal control over financial reporting.

KPMG LLP

Denver, Colorado

February 26, 2013

59

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

CONSOLIDATED BALANCE SHEETS

(in thousands, except share and per share information)

December 31,

2012 2011

Assets

Current assets:

Cash and cash equivalents $ 69,538 $ 2,406

Accounts receivable:

Trade, net of allowance 55,528 58,519

Oil and gas sales, net of allowance 239,106 245,681

Gas gathering, processing, and marketing, net of allowance 7,901 7,565

Other 439 47,644

Oil and gas well equipment and supplies 81,029 85,141

Deferred income taxes 8,477 2,723

Prepaid Expenses 7,420 7,393

Other current assets 699 823

Total current assets 470,137 457,895

Oil and gas properties at cost, using the full cost method of accounting:

Proved properties 11,258,748 9,933,517

Unproved properties and properties under development, not being amortized 645,078 607,219

11,903,826 10,540,736

Less—accumulated depreciation, depletion and amortization (6,899,057) (6,414,528)

Net oil and gas properties 5,004,769 4,126,208

Fixed assets, less accumulated depreciation of $145,130 and $118,278 152,605 118,215

Goodwill—Restated (Note 1) 620,232 620,232

Other assets, net 57,409 34,827

$ 6,305,152 $ 5,357,377

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable:

Trade $ 88,168 $ 64,856

Gas gathering, processing, and marketing 15,485 14,932

Accrued liabilities:

Exploration and development 155,002 173,549

Taxes other than income 29,179 33,946

Other 208,728 178,401

Revenue payable 149,300 150,655

Total current liabilities 645,862 616,339

Long-term debt 750,000 405,000

Deferred income taxes—Restated (Note 6) 1,121,353 903,732

Asset retirement obligation 133,991 139,680

Other liabilities 179,210 162,013

Total liabilities 2,830,416 2,226,764

Stockholders' equity:

Preferred stock, $0.01 par value, 15,000,000 shares authorized, no shares issued — —

Common stock, $0.01 par value, 200,000,000 shares authorized, 86,595,976 and

85,774,084 shares issued, respectively 866 858

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
 

The accompanying notes are an integral part of these consolidated financial statements.

60

Paid-in capital 1,939,628 1,908,506

Retained earnings 1,533,768 1,221,263

Accumulated other comprehensive income (loss) 474 (14)

3,474,736 3,130,613

$ 6,305,152 $ 5,357,377

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME

(in thousands, except per share data)

For the Years Ended

December 31,

2012 2011 2010

Revenues:

Gas sales $ $340,744 $ $530,334 $ 653,793

Oil sales 1,027,757 909,344 755,618

NGL Sales 213,149 263,842 149,151

Gas gathering, processing and other 43,042 53,640 54,662

Gas marketing, net of related costs of $86,813, $119,725 and $99,713

respectively (754) 729 459

$1,623,938 1,757,889 1,613,683

Costs and expenses:

Depreciation, depletion and amortization 513,916 390,461 304,222

Asset retirement obligation 13,019 11,451 7,322

Production 258,584 247,048 194,015

Transportation 57,354 56,711 45,982

Gas gathering and processing 21,965 23,327 26,148

Taxes other than income 86,994 126,468 121,781

General and administrative 54,428 45,256 48,620

Stock compensation 21,919 18,949 12,353

Gain on derivative instruments, net (245) (10,322) (62,696)

Other operating, net 24,961 10,263 4,575

1,052,895 919,612 702,322

Operating income 571,043 838,277 911,361

Other (income) and expense:

Interest expense 49,317 35,611 36,613

Capitalized interest (35,174) (29,057) (29,215)

(Gain) loss on early extinquishment of debt 16,214 — (3,776)

Other, net (19,864) (9,758) (5,992)

Income before income tax 560,550 841,481 913,731

Income tax expense 206,727 311,549 338,949

Net income $ 353,823 $ 529,932 $ 574,782

Earnings per share to common shareholders:

Basic

Distributed $ 0.48 $ 0.40 $ 0.32

Undistributed 3.60 5.77 6.42

$ 4.08 $ 6.17 $ 6.74

Diluted

Distributed $ 0.48 $ 0.40 $ 0.32

Undistributed 3.59 5.75 6.38

$ 4.07 $ 6.15 $ 6.70

Comprehensive income:

Net income $ 353,823 $ 529,932 $ 574,782

Other comprehensive income:

Change in fair value of investments, net of tax 488 (278) 283

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
 

The accompanying notes are an integral part of these consolidated financial statements.

61

Total comprehensive income $ 354,311 $ 529,654 $ 575,065 Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

 

The accompanying notes are an integral part of these consolidated financial statements.

62

Years Ended

December 31,

2012 2011 2010

Cash flows from operating activities:

Net income $ 353,823 $ 529,932 $ 574,782

Adjustments to reconcile net income to net cash provided by operating

activities:

Depreciation, depletion and amortization 513,916 390,461 304,222

Asset retirement obligation 13,019 11,451 7,322

Deferred income taxes 208,216 357,622 292,612

Stock compensation 21,919 18,949 12,353

Derivative instruments, net (245) (3,611) (10,598)

(Gain) loss on early extinguishment of debt 16,214 — (3,776)

Changes in non-current assets and liabilities 3,125 4,418 12,772

Other, net 4,728 5,739 (1,558)

Changes in operating assets and liabilities:

(Increase) decrease in receivables, net 56,435 (48,632) (83,386)

Decrease in oil and gas well equipment and supplies and other

current assets 4,209 32,593 34,250

Decrease in accounts payable and other current liabilities (2,595) (6,647) (8,563)

Net cash provided by operating activities 1,192,764 1,292,275 1,130,432

Cash flows from investing activities:

Oil and gas expenditures (1,662,707) (1,562,159) (959,751)

Sales of oil and gas assets 311,562 117,344 28,235

Sales of other assets 1,060 112,011 5,840

Other capital expenditures (64,987) (96,642) (51,882)

Net cash used by investing activities (1,415,072) (1,429,446) (977,558)

Cash flows from financing activities:

Net increase (decrease) in bank debt (55,000) 55,000 (25,000)

Increase in other long-term debt 750,000 — —

Decrease in other long-term debt (363,595) — (19,450)

Financing costs incurred (13,821) (7,379) (101)

Dividends paid (39,577) (32,581) (25,499)

Issuance of common stock and other 11,433 10,411 28,758

Net cash provided by (used in) financing activities 289,440 25,451 (41,292)

Net change in cash and cash equivalents 67,132 (111,720) 111,582

Cash and cash equivalents at beginning of period 2,406 114,126 2,544

Cash and cash equivalents at end of period $ 69,538 $ 2,406 $ 114,126

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

(in thousands)

Common Stock

Accumulated

Other

Comprehensive

Income (loss)

Paid-in

Capital

Retained

Earnings

Treasury

Stock

Total

Stockholders'

Shares Amount Equity

Balance,

December 31,

2009 83,542 $ 835 $1,859,255 $ 178,035 $ (19)$ —$ 2,038,106

Dividends — — — (27,166) — — (27,166)

Net Income 574,782 574,782

Unrealized

change in fair

value of

investments,

net of tax — — — — 283 — 283

Stock issued

due to

conversion of

convertible

debt 408 4 30,126 30,130

Issuance of

restricted

stock awards 638 6 (6) — — — —

Common stock

reacquired

and retired (428) (4) (32,200) — — — (32,204)

Restricted stock

forfeited and

retired (76) (1) 1 — — — —

Exercise of

stock options 596 6 17,985 — — — 17,991

Vesting of

restricted

stock units 555 6 (6) — — — —

Stock-based

compensation — — 21,688 — — — 21,688

Stock-based

compensation

tax benefit 22,767 — — — 22,767

Equity

attributable

to Floating

rate

convertible

notes — — (36,545) — — — (36,545)

Balance,

December 31,

2010 85,235 $ 852 $1,883,065 $ 725,651 $ 264 $ —$ 2,609,832

Dividends — — — (34,320) — — (34,320)

Net Income — — — 529,932 — — 529,932

Unrealized

change in fair

value of

investments,

net of tax — — — — (278) — (278)

Issuance of

restricted

stock awards 655 7 (7) — — — —

Common stock

reacquired

and retired (192) (2) (16,064) — — — (16,066)

Restricted stock

forfeited and

retired (37) — — — — — —

Exercise of

stock options 7 8 1 3,192 — — — 3,193

Vesting of

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
 

The accompanying notes are an integral part of these consolidated financial statements.

63

restricted

stock units 35 — — — — — —

Stock-based

compensation — — 31,102 — — — 31,102

Stock-based

compensation

tax benefit — — 7,218 — — — 7,218

Balance,

December 31,

2011 85,774 $ 858 $1,908,506 $1,221,263 $ (14)$ —$ 3,130,613

Dividends — — — (41,318) — — (41,318)

Net Income — — — 353,823 — — 353,823

Unrealized

change in fair

value of

investments,

net of tax — — — — 488 — 488

Issuance of

restricted

stock awards 562 5 (5) — — — —

Common stock

reacquired

and retired (184) (2) (11,015) — — — (11,017)

Restricted stock

forfeited and

retired (141) (1) 1 — — — —

Exercise of

stock options 559 6 11,427 — — — 11,433

Vesting of

restricted

stock units 26 — — — — — —

Stock-based

compensation — — 34,085 — — — 34,085

Stock-based

compensation

tax benefit (3,371) — — — (3,371)

Balance,

December 31,

2012 86,596 $ 866 $1,939,628 $1,533,768 $ 474 $ —$ 3,474,736

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 Cimarex Energy Co., a Delaware corporation, is an independent oil and gas exploration and production company. Our operations are mainly

located in Texas, Oklahoma, New Mexico and Kansas.

Basis of presentation

 Our Consolidated Financial Statements have been prepared in accordance with accounting principles generally accepted in the United States of

America, or GAAP. Our significant accounting policies are discussed below. The accounts of Cimarex and its subsidiaries are presented in the

accompanying Consolidated Financial Statements. All intercompany accounts and transactions were eliminated in consolidation. Certain amounts in

prior years' financial statements have been reclassified to conform to the 2012 financial statement presentation.

Use of estimates

 The preparation of our financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts

of assets, liabilities, revenues, and expenses. The more significant areas requiring the use of management's estimates and judgments relate to the

estimation of proved oil and gas reserves, the use of these oil and gas reserves in calculating depletion, depreciation, and amortization, the use of the

estimates of future net revenues in computing ceiling test limitations and estimates of future abandonment obligations used in recording asset retirement

obligations, and the assessment of goodwill.

 The process of estimating quantities of oil and gas reserves is complex, requiring significant decisions in the evaluation of all available geological,

geophysical, engineering and economic data. The data for a given field may also change substantially over time as a result of numerous factors

including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production

under varying economic conditions. As a result, material revisions to existing reserve estimates may occur from time to time. Although every reasonable

effort is made to ensure that our reserve estimates represent the most accurate assessments possible, subjective decisions and available data for our

various fields make these estimates generally less precise than other estimates included in financial statement disclosures.

 Estimates and judgments are also required in determining allowance for doubtful accounts, impairments of undeveloped properties and other

assets, purchase price allocation, valuation of deferred tax assets, fair value measurements, and commitments and contingencies. We analyze our

estimates, including those related to oil, gas and NGL revenues, and base our estimates on historical experience and various other assumptions that we

believe to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Cash, Cash Equivalents and Restricted Cash

 Cash and cash equivalents consist of cash in banks and investments readily convertible into cash, which have original maturities within three

months at the date of acquisition. Cash equivalents are stated at cost, which approximates market value. We have restricted cash of $811 thousand and

$758 thousand at December 31, 2012 and 2011, respectively, included in our noncurrent other assets consisting of monies from third parties which are

being held by Cimarex, as operator of a property in Oklahoma. The cash will be released when ownership disputes among the third parties are resolved.

64

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Oil and Gas Well Equipment and Supplies

 Our oil and gas well equipment and supplies are valued at the lower of cost or market using weighted average cost.

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. Exploration and development costs include dry hole costs, geological and geophysical costs, direct overhead

related to exploration and development activities, and other costs incurred for the purpose of finding oil and gas reserves. Salaries and benefits paid to

employees directly involved in the exploration and development of properties, as well as other internal costs that can be directly identified with

acquisition, exploration, and development activities, are also capitalized. Under the full cost method of accounting, no gain or loss is recognized upon

the disposition of oil and gas properties unless such disposition would significantly alter the relationship between capitalized costs and proved reserves.

 Companies that follow the full cost accounting method are required to make quarterly "ceiling test" calculations. This test ensures that total

capitalized costs for oil and gas properties (net of accumulated DD&A and deferred income taxes) do not exceed the sum of the present value

discounted at 10% of estimated future net cash flows from proved reserves, the cost of properties not being amortized, the lower of cost or estimated

fair value of unproven properties included in the costs being amortized, and all related tax effects. We currently do not have any unproven properties that

are being amortized. Revenue calculations in the reserves are based on the unweighted average first-day-of-the-month prices for the prior twelve

months. Changes in proved reserve estimates (whether based upon quantity revisions or commodity prices) will cause corresponding changes to the full

cost ceiling limitation. If net capitalized costs subject to amortization exceed this limit, the excess would be charged to expense. Any recorded

impairment of oil and gas properties is not reversible at a later date.

 Our quarterly and annual ceiling tests are primarily impacted by commodity prices, reserve quantities added and produced, overall exploration and

development costs and depletion expense. As of December 31, 2012, 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. As of December 31, 2012, a decline of 3% or more in the value of the ceiling

limitation would have resulted in an impairment. If negative trends continue, we may incur impairment charges in the future, which could have a material

adverse effect on our results of operations in the period taken.

 Depletion of proved oil and gas properties is computed on the units-of-production method, whereby capitalized costs, including future

development costs and asset retirement obligations, are amortized over total estimated proved reserves. Changes in our estimate of proved reserve

quantities and commodity prices will cause corresponding changes in depletion expense in periods subsequent to these changes. The capitalized costs of

unproved properties, including those in wells in progress, are excluded from the costs being amortized. We do not have major development projects that

are excluded from costs being amortized. On a quarterly basis, we evaluate excluded costs for inclusion in the costs to be amortized resulting from the

determination of proved reserves or impairments. To the extent that the evaluation indicates these properties are impaired, the amount of the impairment

is added to the capitalized costs to

65

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

be amortized. Expenditures for maintenance and repairs are charged to production expense in the period incurred.

Goodwill

 Goodwill represents the excess of the purchase price of business combinations over the fair value of the net assets acquired and is tested for

impairment at least annually. In 2012 we adopted FASB Accounting Standards Update No. 2011-08: Intangibles—Goodwill and Other (Topic 350):

Testing Goodwill for Impairment (ASU 2011-08). ASU 2011-08 allows an entity to first assess qualitative factors to determine whether it is more

likely than not (with a greater than 50% threshold) that the fair value of a reporting unit is less than its carrying amount as a basis for determining

whether it is necessary to perform the two-step goodwill impairment test. If goodwill is determined to be impaired then it is written down to a calculated

fair value by charging the impairment to expense.

 We evaluate our goodwill for impairment in the fourth quarter of each year or whenever events or changes in circumstances indicate the possibility

that goodwill may be impaired. Based upon our assessment at December 31, 2012, goodwill was not impaired. However, it is possible that goodwill

could become impaired in the future if commodity prices or other economic factors become less favorable. A goodwill impairment charge would have

no effect on liquidity or our capital resources, but it would adversely affect our results of operations in the period incurred.

 During the fourth quarter of 2012, we determined that our goodwill was overstated due to certain errors in the calculation of our net deferred tax

liability in conjunction with our 2005 business combination. We have concluded this is an immaterial correction of error and we have restated the

accompanying balance sheet as of December 31, 2005 to decrease both goodwill and deferred income tax liability by $71.2 million. The errors were

noncash and had no effect on our statements of income and comprehensive income, cash flow or stockholder's equity.

Revenue Recognition

Oil, Gas and NGL Sales

 Revenues from oil, gas and NGL sales are based on the sales method, with revenue recognized on actual volumes sold to purchasers. There is a

ready market for our production, with sales occurring soon after production. The determination to record and separately disclose NGL volumes is based

on the location at which both title contractually transfers from Cimarex to a buyer and the associated volumes can be physically quantified. For those

NGL volumes that we have recorded and disclosed separately, contractual title of the volumes has passed from Cimarex to a buyer at a point where the

NGL volumes have been physically separated from the production stream. Should title contractually transfer before NGL volumes can be physically

separated and quantified (typically at the wellhead), we do not report separate NGL volumes, and the value of the NGLs are included in the reported

value of the disclosed gas volumes.

Marketing Sales

 We market and sell natural gas for working interest owners under short term sales and supply agreements and earn a fee for such services.

Revenues are recognized as gas is delivered and are reflected net of gas purchases on the consolidated statements of income and comprehensive income.

66

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Gas Imbalances

 We use the sales method of accounting for gas imbalances. Under this method, revenue is recorded on the basis of gas actually sold. Gas reserves

are adjusted to the extent there are sufficient quantities of natural gas to make up an imbalance. In situations where there are insufficient reserves

available to make-up an overproduced imbalance, then a liability is established. The natural gas imbalance liability at December 31, 2012 and 2011 was

$5.4 million and $4.5 million, respectively. At December 31, 2012 and 2011, we were also in an under-produced position relative to certain other third

parties.

General and Administrative Expenses

 General and administrative expenses are reported net of amounts reimbursed by working interest owners of the oil and gas properties operated by

Cimarex and net of amounts capitalized pursuant to the full cost method of accounting.

Derivatives

 Our derivative contracts are recorded on the balance sheet at fair value. Our firm sales contracts qualify for the normal purchase and normal sale

exception. Contracts that qualify for this treatment do not require mark-to-market accounting treatment. See Note 2 for additional information regarding

our derivative instruments.

Income Taxes

 Deferred income taxes are computed using the liability method. Deferred income taxes are provided on all temporary differences between the

financial basis and the tax basis of assets and liabilities. Valuation allowances are established to reduce deferred tax assets to an amount that more likely

than not will be realized. See Note 6 for additional information regarding our income taxes.

Contingencies

 A provision for contingencies is charged to expense when the loss is probable and the cost can be reasonably estimated. Determining when

expenses should be recorded for these contingencies and the appropriate amounts for accrual is a complex estimation process that includes subjective

judgment. In many cases, this judgment is based on interpretation of laws and regulations, which can be interpreted differently by regulators and/or

courts of law. We closely monitor known and potential legal, environmental, and other contingencies and periodically determine when we should record

losses for these items based on information available to us. See Note 13 for additional information regarding our contingencies.

Asset Retirement Obligations

 In the period incurred, asset retirement obligations associated with the retirement of tangible long-lived assets are recognized as liabilities, along

with an increase to the carrying amounts of the related long-lived assets. The cost of the tangible asset, including the asset retirement cost, is depreciated

over the useful life of the asset. Oil and gas producing companies incur this liability which includes costs related to the plugging of wells, the removal of

facilities and equipment, and site restorations. Subsequent to initial

67

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

1. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

measurement, the asset retirement liability is required to be accreted each period. Capitalized costs associated with the abandoning of wells are depleted

as a component of the full cost pool.

Stock-based Compensation

 We recognize compensation related to all stock-based awards, including stock options, in the financial statements based on their estimated grantdate fair value. We grant various types of stock-based awards including stock options, restricted stock (includes service-based vesting and market

condition-based vesting) and restricted stock units. The fair value of stock option awards is determined using the Black-Scholes option pricing model.

Service-based restricted stock and units are valued using the market price of our common stock on the grant date. The fair value of the market conditionbased restricted stock is based on the grant-date market value of the award utilizing a statistical analysis. Compensation cost is recognized ratably over

the applicable vesting period. To the extent compensation cost relates to employees directly involved in oil and gas acquisition, exploration and

development activities, such amounts are capitalized to oil and gas properties. Amounts not capitalized to oil and gas properties are recognized as stock

compensation expense. See Note 8 for additional information regarding our stock-based compensation.

Earnings per Share

 We calculate earnings (loss) per share recognizing that unvested share-based payment awards that contain non-forfeitable rights to dividends or

dividend equivalents are "participating securities" and therefore should be included in computing earnings per share using the two-class earnings

allocation method. The two-class method is an earnings allocation formula that determines earnings per share for each class of common stock and

participating security according to dividends declared (or accumulated) and participation rights in undistributed earnings. Our unvested share based

payment awards, consisting of restricted stock and units qualify as participating securities.

Segment Information

 We have determined that our business is comprised of only one segment because our gathering, processing and marketing activities are ancillary to

our production operations and are not separately managed.

Recently Issued Accounting Standards

 No significant accounting standards applicable to Cimarex have been issued during the year ended December 31, 2012.

Subsequent Events

 The accompanying financial disclosures include an evaluation of subsequent events through the date of this filing.

2. DERIVATIVE INSTRUMENTS/HEDGING

 We periodically enter into derivative instruments to mitigate a portion of our potential exposure to a decline in oil and/or gas prices and the

corresponding negative impact on cash flow available for

68

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

2. DERIVATIVE INSTRUMENTS/HEDGING (Continued)

reinvestment. While the use of these instruments limits the downside risk of adverse price changes, their use may also limit future revenues 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 current hedging positions.

 Our derivative contracts are carried at their fair value on our balance sheet using Level 2 inputs. We entered into oil contracts at the end of 2011 and

in the beginning of 2012. All of these oil contracts were settled as of December 31, 2012. The estimated fair value of our oil contracts as of

December 31, 2011 was a liability of $245 thousand and is located in Current liabilities—other accrued liabilities on the balance sheet.

 Because we elect not to account for our derivative contracts as cash flow hedges, we recognize all realized settlements and unrealized changes in

fair value in earnings. Cash settlements of our derivative contracts are included in cash flows from operating activities in our statements of cash flows.

 The following table summarizes the realized and unrealized gains and (losses) from settlements and changes in fair value of our derivative contracts

as presented in our accompanying financial statements:

 At December 31, 2012, we did not have any hedges in place. Subsequent to December 31, 2012 we entered into the following oil hedges:

 We are exposed to financial risks associated with these contracts from non-performance by our counterparties. Counterparty risk is also a

component of our estimated fair value calculations. We have mitigated 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 hedge liability positions.

69

(in thousands) 2012 2011 2010

Settlements gains (losses):

Natural gas contracts $ — $ 8,485 $ 53,985

Oil contracts — (1,774) (1,887)

Total settlements gains (losses) — 6,711 52,098

Unrealized gains (losses) from change in fair value:

Natural gas contracts — (5,731) 8,802

Oil contracts 245 9,342 1,796

Total net unrealized gains (losses) from change in fair value 245 3,611 10,598

Total gain (loss) on derivative instruments, net $ 245 $ 10,322 $ 62,696

Weighted Average Price

Period Type Volume/Day Index(1) Floor Ceiling Swap

Feb 13 - Dec 13 Collars 6,000 Bbls WTI $ 85.00 $ 102.31 —

Feb 13 - Dec 13 Swaps 6,000 Bbls WTI — — $ 96.13

(1) WTI refers to West Texas Intermediate price as quoted on the New York Mercantile Exchange.

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. 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 tables provide fair value measurement information for certain liabilities as of December 31, 2012 and December 31, 2011 (in

thousands).

 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 following methods and assumptions were used to estimate the fair value of the liabilities in the table above.

Debt (Level 1)

 The fair value of our bank debt at December 31, 2011 was estimated to approximate the carrying amount because the floating rate interest paid on

such debt was set for periods of three months or less.

 The fair value for our 5.875% and 7.125% fixed rate notes was based on their last traded value before year end.

Derivative Instruments (Level 2)

 The fair value of our derivative instruments at December 31, 2011 was estimated using internal discounted cash flow calculations. Cash flows are

based on the stated contract prices and current and published forward commodity price curves, adjusted for volatility. The cash flows are risk adjusted

relative to non-performance for both our counterparties and our liability positions. Please see Note 2 for further information on the fair value of our

derivative instruments.

Other Financial Instruments

 The carrying amounts of our cash, cash equivalents, restricted cash, accounts receivable, accounts payable, and accrued liabilities approximate fair

value because of the short-term maturities and/or liquid

70

Carrying

Amount Fair Value

December 31, 2012:

Financial Liabilities:

5.875% Notes due 2022 $ 750,000 $ 825,750

Carrying

Amount Fair Value

December 31, 2011:

Financial Liabilities:

Bank Debt $ 55,000 $ 55,000

7.125% Notes due 2017 $ 350,000 $ 366,772

Derivative instruments—current liabilities $ 245 $ 245

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

3. FAIR VALUE MEASUREMENTS (Continued)

nature of these assets and liabilities. Included in Accrued liabilities, other at December 31, 2012 and 2011, respectively, are liabilities of approximately

$36.9 million and $46.9 million representing the amount by which checks issued, but not yet presented to our banks for collection, exceeded balances in

applicable bank accounts. Also included in Accrued liabilities, other at December 31, 2012 and 2011, respectively, are accrued payroll related general

and administrative expenses of $31.3 million and $24.0 million, and the current portion of the Asset retirement obligation of $51.1 million and

$43.7 million.

 Our accounts receivable are primarily from either purchasers of our gas, oil and NGL production (customers) or from exploration and production

companies which own interests in properties we operate. This industry concentration has the potential to impact our overall exposure to credit risk,

either positively or negatively, in that our customers and joint working interest owners may be similarly affected by changes in economic, industry or

other conditions.

 We conduct credit analyses of customers prior to making any sales to new customers or increasing credit for existing customers and may require

parental 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, based on the judgment of management, it is probable that a receivable will not be collected and the amount of the reserve may

be reasonably estimated. At December 31, 2012, the allowance for doubtful accounts totaled $6.5 million. At December 31, 2011, the allowance for

doubtful accounts was $6.4 million.

Major Customers

 Our major customers during 2012 were Sunoco Logistics Partners L.P. (Sunoco) and Enterprise Products Partners L.P. (Enterprise) and

accounted for 22% and 21%, respectively, of our consolidated revenues in 2012. During 2011, our major customers were Sunoco Logistics

Partners L.P. and DCP Midstream LLC and accounted for 22% and 15%, respectively, of our 2011 consolidated revenues. Sunoco is a significant

purchaser of our oil in New Mexico and Beaumont, Texas areas. Enterprise is our primary oil purchaser in Oklahoma and Ward/Culberson Counties in

Texas. If either of these purchasers were to stop purchasing our production from these areas, there are a number of other purchasers to whom we could

sell our production with little delay. If both parties were to discontinue purchasing our product, there would be challenges initially, but ample markets to

handle the disruption.

4. ASSET RETIREMENT OBLIGATIONS

 We recognize 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. Oil and gas producing companies incur this liability which includes costs related to the

abandoning of wells, the removal of facilities and equipment, and site restorations. Subsequent to initial measurement, the asset retirement liability is

required to be accreted each period. If the fair value of a recorded asset retirement obligation changes, a revision is recorded to both the asset retirement

obligation and the asset retirement capitalized cost. Capitalized costs are depleted as a component of the full cost pool.

71

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

4. ASSET RETIREMENT OBLIGATIONS (Continued)

 The following table reflects the components of the change in the carrying amount of the asset retirement obligation for the years ended

December 31, 2012 and 2011:

 The revisions recognized during 2011 were primarily from increases in the undiscounted abandonment cost estimates for our Gulf of Mexico

properties ($35.8 million) and for our Permian basin properties ($25.1 million).

5. LONG TERM DEBT

 A summary of our debt is as follows:

Bank Debt

 We have a five-year senior unsecured revolving credit facility (Credit Facility) which matures July 14, 2016. The Credit Facility provides for a

borrowing base of $2 billion. Aggregate commitments from our lenders were increased from $800 million to $1 billion in July 2012.

 The borrowing base under the Credit Facility is determined at the discretion of lenders based on the value of our proved reserves. The next regular

annual redetermination date is on April 15, 2013.

 As of December 31, 2012, we had no bank debt outstanding. We had letters of credit outstanding under the Credit Facility of $2.5 million leaving

an unused borrowing availability of $997.5 million.

 At Cimarex's option, borrowings under the Credit Facility may bear interest at either (a) LIBOR plus 1.75-2.5%, based on our leverage ratio, or

(b) the higher of (i) a prime rate, (ii) the federal funds effective rate plus 0.50%, or (iii) adjusted one-month LIBOR plus 1.0% plus, in each case, an

additional 0.75-1.5%, based on our leverage ratio.

 The Credit Facility also has financial covenants that include the maintenance of current assets (including unused bank commitments) to current

liabilities of greater than 1.0 to 1.0. We also must

72

(in thousands) 2012 2011

Asset retirement obligation at January 1, $ 183,361 $ 138,769

Liabilities incurred 22,355 5,710

Liability settlements and disposals (42,958) (29,634)

Accretion expense 10,318 7,204

Revisions of estimated liabilities 12,062 61,312

Asset retirement obligation at December 31, 185,138 183,361

Less current obligation 51,147 43,681

Long-term asset retirement obligation $ 133,991 $ 139,680

(in thousands)

December 31,

2012

December 31,

2011

Bank debt $ — $ 55,000

7.125% Senior Notes due 2017 — 350,000

5.875% Senior Notes due 2022 750,000 —

Total long-term debt $ 750,000 $ 405,000

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

5. LONG TERM DEBT (Continued)

maintain a leverage ratio of total debt to earnings before interest expense, income taxes and noncash items (such as depreciation, depletion and

amortization expense, unrealized gains and losses on commodity derivatives, ceiling test write-downs, and goodwill impairments) of not more than 3.5

to 1.0. Other covenants could limit our ability to incur additional indebtedness, pay dividends, repurchase our common stock, or sell assets. As of

December 31, 2012, we were in compliance with all of the financial and nonfinancial covenants.

5.875% Notes due 2022

 In April, 2012 we issued $750 million of 5.875% senior notes due May 1, 2022, with interest payable semiannually in May and November. The

notes were sold to the public at par. The notes are governed by an indenture containing certain covenants, events of default and other restrictive

provisions. We may redeem the notes in whole or in part, at any time on or after May 1, 2017, at redemption prices of 102.938% of the principal

amount as of May 1, 2017, declining to 100% on May 1, 2020 and thereafter.

 Net proceeds from the offering approximated $737 million, after deducting underwriting discounts and offering costs. We used a portion of the net

proceeds to retire our 7.125% senior notes. The remaining net proceeds were used for general corporate purposes, including repayment of $232 million

outstanding under our Credit Facility.

7.125% Notes due 2017 and other

 In May, 2007, we issued $350 million of 7.125% senior unsecured notes at par that were scheduled to mature May 1, 2017. On March 22, 2012

we commenced a cash tender offer (the Tender Offer) to purchase all of the outstanding 7.125% senior notes.

 Under the terms of the Tender Offer, holders who tendered their notes on or prior to April 4, 2012 received (i) $1,035.63 per $1,000.00 in

principal amount of notes tendered plus (ii) a consent payment of $3.75 per $1,000.00 in principal amount of notes tendered. Through April 18, 2012, a

total of $300,163,000 of notes had been redeemed. In May 2012, the remaining notes were redeemed at 103.563% of the principal amount. We

recognized a $16.2 million loss on early extinguishment of debt during the second quarter of 2012.

 In connection with the Tender Offer, holders who tendered their notes were deemed to consent to proposed amendments to eliminate or modify

certain covenants and events of default and other provisions contained in the indenture governing the 7.125% senior notes.

 On July 1, 2010, certain holders of our floating rate convertible notes elected to convert their notes. The holders received $20.5 million and

408,450 shares of common stock. We recorded a gain of $3.8 million on the settlement of the notes.

73

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. INCOME TAXES

 Federal income tax expense (benefit) for the years presented differs from the amounts that would be provided by applying the U.S. Federal income

tax rate, due to the effect of state income taxes, and the Domestic Production Activities allowance. The components of the provision for income taxes are

as follows:

 Reconciliations of the income tax (benefit) expense calculated at the federal statutory rate of 35% to the total income tax (benefit) expense are as

follows:

74

Years Ended December 31,

(in thousands) 2012 2011 2010

Current Taxes:

Federal (benefit) $ (1,629) $ (45,404) $ 42,952

State (benefit) 140 (669) 3,385

(1,489) (46,073) 46,337

Deferred taxes:

Federal 199,459 345,397 280,190

State 8,757 12,225 12,422

208,216 357,622 292,612

$ 206,727 $ 311,549 $ 338,949

Years Ended December 31,

(in thousands) 2012 2011 2010

Provision at statutory rate $ 196,192 $ 294,518 $ 319,806

Effect of state taxes 8,902 11,445 15,619

Domestic Production Activities allowance 567 2,343 (1,240)

Other permanent differences 1,066 3,243 4,764

Income tax (benefit) expense $ 206,727 $ 311,549 $ 338,949

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

6. INCOME TAXES (Continued)

 The components of Cimarex's net deferred tax liabilities are as follows:

 During the fourth quarter of 2012, we determined that our net deferred tax liability was overstated due to certain errors in the calculation of our

deferred taxes in conjunction with our 2005 business combination. We have concluded this is an immaterial correction of an error and we have restated

the above table and the accompanying balance sheet as of December 31, 2005 to decrease our net deferred income tax liability by $71.2 million with a

corresponding decrease in goodwill. The errors were noncash and had no effect on our statements of income and comprehensive income, cash flow or

stockholder's equity.

 At December 31, 2012, the company had a U.S. net tax operating carryforward of approximately $467.7 million which would expire in 2032. We

believe that the carryforward will be utilized before it expires. We also had an alternative minimum tax credit carryforward of approximately

$4.4 million.

 At December 31, 2012 and 2011 we had no unrecognized tax benefits that would impact our effective rate and we have made no provisions for

interest or penalties related to uncertain tax positions. The tax years 2009 - 2011 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 for tax years 2005 - 2011 for examination.

75

December 31,

(in thousands) 2012 2011

Long-term:

Assets:

Stock compensation and other accrued amounts $ 97,972 $ 70,092

Net operating loss carryforward 161,308 41,147

Credit carryforward 4,449 2,909

263,729 114,148

Liabilities:

Property, plant and equipment (1,385,082) (1,017,880)

Net, long-term deferred tax liability—restated (1,121,353) (903,732)

Current:

Assets:

Derivative instruments — 89

Other 8,477 2,634

8,477 2,723

Net deferred tax liabilities $ (1,112,876) $ (901,009)

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

7. CAPITAL STOCK

 Authorized capital stock consists of 200 million shares of common stock and 15 million shares of preferred stock. At December 31, 2012 there

were no shares of preferred stock outstanding. A summary of our issued and outstanding common stock activity follows:

Dividends

 A cash dividend has been paid to shareholders in every quarter since the first quarter of 2006. In February 2012, the quarterly dividend was

increased to $0.12 per share from $0.10 per share. Future dividend payments will depend on our level of earnings, financial requirements and other

factors considered relevant by the Board of Directors.

8. STOCK-BASED COMPENSATION

 Our 2011 Equity Incentive Plan (the 2011 Plan) was approved by stockholders in May 2011 and our previous plan was terminated. Outstanding

awards under the previous plan were not impacted. The 2011 Plan provides for grants of stock options, restricted stock, restricted stock units,

performance stock and performance stock units. A total of 5.3 million shares of common stock may be issued under the 2011 Plan.

76

(in thousands)

December 31, 2009 83,542

Shares issued due to conversion of convertible debt 408

Restricted shares issued under compensation plans, net of reacquired stock and

cancellations 755

Option exercises, net of cancellations 530

December 31, 2010 85,235

Restricted shares issued under compensation plans, net of reacquired stock and

cancellations 461

Option exercises, net of cancellations 78

December 31, 2011 85,774

Restricted shares issued under compensation plans, net of reacquired stock and

cancellations 263

Option exercises, net of cancellations 559

December 31, 2012 86,596

2012 2011 2010

Dividend declared (in millions) $ 41.3 $ 34.3 $ 27.2

Dividend per share $ 0.48 $ 0.40 $ 0.32

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCK-BASED COMPENSATION (Continued)

 We have recognized non-cash stock-based compensation cost as follows:

 Historical amounts may not be representative of future amounts as additional awards may be granted.

Restricted Stock and Units

 The following table provides information about restricted stock awards granted during the last three years.

 Performance-based awards have been granted to eligible executives and are subject to market condition-based vesting determined by our stock

price performance relative to a defined peer group's stock price performance. After three years of continued service, an executive will be entitled to vest

in 50% to 100% of the award. In accordance with Internal Revenue Code Section 162(m), certain of the amounts awarded may not be deductible for tax

purposes. Service-based stock awards granted to other eligible employees and non-employee directors have vesting schedules of three to five years.

 Compensation cost for the performance-based stock awards is based on the grant-date fair value of the award utilizing a Monte Carlo simulation

model. Compensation cost for the service-based vesting restricted shares and units is based upon the grant-date market value of the award. Such costs

are recognized ratably over the applicable vesting period.

77

Year Ended December 31,

(in thousands) 2012 2011 2010

Restricted stock and units $ 31,297 $ 27,602 $ 17,865

Stock options 2,889 3,518 3,826

34,186 31,120 21,691

Less amounts capitalized to oil and gas properties (12,267) (12,171) (9,338)

Compensation expense $ 21,919 $ 18,949 $ 12,353

Year Ended December 31,

2012 2011 2010

Number

of Shares

Weighted

Average

Grant-Date

Fair Value

Number

of Shares

Weighted

Average

Grant-Date

Fair Value

Number

of Shares

Weighted

Average

Grant-Date

Fair Value

Performancebased stock

awards 262,770 $ 43.22 363,758 $ 73.01 396,000 $ 41.94

Service-based

stock awards 299,499 $ 54.17 291,053 $ 89.47 242,224 $ 70.39

Total restricted

stock awards 562,269 $ 49.05 654,811 $ 80.33 638,224 $ 52.74

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCK-BASED COMPENSATION (Continued)

 The following table reflects the non-cash compensation cost related to our restricted stock and units:

 Compensation cost in 2012 for the performance-based awards includes $3.9 million of accelerated vesting related to the death of former Chairman,

F.H. Merelli.

 Unrecognized compensation cost related to unvested restricted shares and units at December 31, 2012 was $54 million. We expect to recognize that

cost over a weighted average period of 2 years.

 The following table provides information on restricted stock and unit activity during the last three years:

78

Year Ended December 31,

(in thousands) 2012 2011 2010

Performance-based stock awards $ 19,066 $ 16,268 $ 9,604

Service-based stock awards 12,231 11,300 8,228

Restricted unit awards — 34 33

31,297 27,602 17,865

Less amounts capitalized to oil and gas properties (11,132) (10,241) (6,941)

Restricted stock and units compensation expense $ 20,165 $ 17,361 $ 10,924

Year Ended December 31,

2012 2011 2010

Restricted Stock:

Outstanding beginning of period 2,019,552 1,899,511 1,727,250

Vested (602,372) (497,720) (389,443)

Granted 562,269 654,811 638,224

Canceled (140,713) (37,050) (76,520)

Outstanding end of period 1,838,736 2,019,552 1,899,511

Restricted Stock Units:

Outstanding beginning of period 59,470 94,807 649,843

Converted to Stock (25,632) (35,337) (555,036)

Outstanding end of period 33,838 59,470 94,807

Vested included in outstanding 33,838 59,470 93,543

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCK-BASED COMPENSATION (Continued)

Stock Options

 The following table provides information about stock options granted during the last three years:

 Options granted under our 2011 and previous plans expire seven to ten years from the grant date and have service-based vesting schedules of three

to five years. The plans provide that all grants have an exercise price of the average of the high and low prices of our common stock as reported by the

New York Stock Exchange on the date of grant.

 Compensation cost related to stock options is based on the grant-date fair value of the award, recognized ratably over the applicable vesting period.

We estimate the fair value using the Black-Scholes option-pricing model. Expected volatilities are based on the historical volatility of our common stock.

We also use historical data to estimate the probability of option exercise, expected years until exercise and potential forfeitures. We use U.S. Treasury

bond rates in effect at the grant date for our risk-free interest rates.

 The following summarizes the options granted, the weighted average grant-date fair value, the total fair value of the options, and the assumptions

used to determine the fair value of those options:

79

Year Ended December 31,

2012 2011 2010

Options

Weighted

Average

Grant-Date

Fair Value

Weighted

Average

Exercise

Price Options

Weighted

Average

Grant-Date

Fair Value

Weighted

Average

Exercise

Price Options

Weighted

Average

Grant-Date

Fair Value

Weighted

Average

Exercise

Price

Granted to certain

executive officers — $ — $ — 90,000 $ 19.17 $ 55.96 — $ — $ —

Granted to other

employees 152,800 $ 20.55 $ 51.92 91,300 $ 34.20 $ 86.01 93,000 $ 28.63 $ 70.30

152,800 181,300 93,000

Year Ended December 31,

2012 2011 2010

Options granted 152,800 181,300 93,000

Weighted average grant-date fair value $ 20.55 $ 26.74 $ 28.63

Total Fair Value (in thousands) $ 3,140 $ 4,848 $ 2,662

Expected years until exercise 5.3 4.3 5.5

Expected stock volatility 47.4% 48.7% 44.6%

Dividend yield 0.9% 0.6% 0.6%

Risk-free interest rate 0.6% 0.9% 1.9%

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCK-BASED COMPENSATION (Continued)

 Non-cash compensation cost related to our stock options is reflected in the following table:

 As of December 31, 2012, there was $4.8 million of unrecognized compensation cost related to non-vested stock options. We expect to recognize

that cost on a pro rata basis over a weighted average period of 2 years.

 Information about outstanding stock options is summarized below:

 The following table provides information regarding options exercised and the grant-date fair value of options vested:

80

Year Ended December 31,

(in thousands) 2012 2011 2010

Stock option awards 2,889 3,518 3,826

Less amounts capitalized to oil and gas properties (1,135) (1,930) (2,397)

Stock option compensation expense $ 1,754 $ 1,588 $ 1,429

Options

Weighted

Average

Exercise

Price

Weighted

Average

Remaining

Term

Aggregate

Intrinsic

Value (in

thousands)

Outstanding as of January 1, 2012 1,113,334 $ 37.94

Exercised (558,419) $ 20.47

Granted 152,800 $ 51.92

Canceled (3,149) $ 61.38

Forfeited (17,107) $ 62.38

Outstanding as of December 31, 2012 687,459 $ 54.51 5.9 Years $ 5,132

Exercisable as of December 31, 2012 370,397 $ 49.32 5.7 Years $ 4,308

Year Ended December 31,

(in thousands) 2012 2011 2010

Number of options exercised 558,419 78,661 596,344

Cash received from option exercises $ 11,433 $ 3,193 $ 17,991

Tax benefit from option exercises included in paid-in-capital $ 76 $ 1,407 $ 9,199

Intrinsic value of options exercised $ 22,482 $ 3,856 $ 25,210

Grant-date fair value of options vested $ 2,560 $ 4,128 $ 3,624

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

8. STOCK-BASED COMPENSATION (Continued)

 The following summary reflects the status of non-vested stock options as of December 31, 2012 and changes during the year:

9. EARNINGS PER SHARE

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

81

Options

Weighted

Average

Grant-Date

Fair Value

Weighted

Average

Exercise

Price

Non-vested as of January 1, 2012 308,411 $ 23.37 $ 60.75

Vested (127,042) $ 20.15 $ 50.33

Granted 152,800 $ 20.55 $ 51.92

Forfeited (17,107) $ 24.94 $ 62.38

Non-vested as of December 31, 2012 317,062 $ 23.22 $ 60.58

Year Ended December 31,

(in thousands, except per share data) 2012 2011 2010

Basic:

Net income $ 353,823 $ 529,932 $ 574,782

Participating securities' share in earnings (6,753) (12,005) (12,798)

Net income applicable to common shareholders $ 347,070 $ 517,927 $ 561,984

Diluted:

Net income $ 353,823 $ 529,932 $ 574,782

Participating securities' share in earnings (6,732) (11,950) (12,731)

Net income applicable to common shareholders $ 347,091 $ 517,982 $ 562,051

Shares:

Basic shares outstanding 84,757 83,755 83,335

Incremental shares from assumed exercise of stock options 277 398 452

Fully diluted common stock 85,034 84,153 83,787

Excluded(1) 414 273 184

Earnings per share to common shareholders:(2)

Basic $ 4.08 $ 6.17 $ 6.74

Diluted $ 4.07 $ 6.15 $ 6.70

(1) Inclusion of certain outstanding stock options would have an anti-dilutive effect. 

(2) Earnings per share are based on actual figures rather than the rounded figures presented.

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

10. EMPLOYEE BENEFIT PLANS

 We maintain and sponsor a contributory 401(k) plan for our employees. Annual costs related to the plan were $8.2 million for 2012 and

$8.9 million for each of 2011 and 2010.

11. RELATED PARTY TRANSACTIONS

 Helmerich & Payne, Inc. (H&P) provides contract drilling services to Cimarex. Drilling costs of approximately $20.8 million were incurred by

Cimarex related to such services for 2012. During 2011 and 2010, such costs were $37.4 million and $22.6 million, respectively. At December 31,

2012, we had no minimum expenditure commitments to secure the use of H&P's drilling rigs. We had minimum expenditure commitments of

$3.5 million and $8.3 million at December 31, 2011 and 2010, respectively. Hans Helmerich, a director of Cimarex, is Chairman and Chief Executive

Officer of H&P.

 Certain subsidiaries of Newpark Resources, Inc. have provided various drilling services to Cimarex. Costs of such services were $4.1 million in

2012. During 2011 and 2010, such costs were $7.3 million and $10.2 million, respectively. Jerry Box, a director of Cimarex, is the non-executive

Chairman of the Board of Newpark.

12. SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

13. COMMITMENTS AND CONTINGENCIES

Lease Commitments

 We have various commitments for office space and equipment under operating lease arrangements. Rental expense for the operating leases totaled

$5.7 million in 2012. They were $5.3 million and $6.1 million for 2011 and 2010, respectively. Shown below are future minimum payments required

under these leases as of December 31, 2012:

82

For the Years Ended December 31,

(in thousands) 2012 2011 2010

Cash paid during the period for:

Interest expense (including capitalized amounts) $ 42,420 $ 29,650 $ 29,686

Interest capitalized $ 30,255 $ 24,193 $ 23,688

Income taxes $ 377 $ 1,753 $ 108,846

Cash received for income taxes $ 49,754 $ 59,109 $ 4,166

(in thousands)

Operating

Leases

2013 $ 13,486

2014 8,205

2015 9,685

2016 9,893

2017 9,538

Later years 80,764

Total future minimum lease payments $ 131,571

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. COMMITMENTS AND CONTINGENCIES (Continued)

Other Commitments

 We have drilling commitments of approximately $206.1 million consisting of obligations to finish drilling and completing wells in progress at

December 31, 2012. We also have various commitments for drilling rigs as well as certain service contracts. The total minimum expenditure

commitments under these agreements are $6.6 million.

 We have projects in Oklahoma, New Mexico, and Texas where we are constructing gathering facilities and pipelines. At December 31, 2012, we

had commitments of $1.7 million relating to this construction.

 At December 31, 2012, we had firm sales contracts to deliver approximately 26.8 Bcf of natural gas over the next 16 months. If this gas is not

delivered, our financial commitment would be approximately $86.4 million. 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 reserves and production levels.

 We have other various transportation and delivery commitments in the normal course of business, which approximate $9.5 million.

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

Litigation

 In the normal course of business, we have various litigation matters. We assess the probability of estimable amounts related to litigation matters in

accordance with guidance established by the FASB and adjust our accruals accordingly. Though some of the related claims may be significant, the

resolution of them we believe, 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.

Hitch Enterprises, Inc. et al. v. Cimarex Energy Co. et al.

 On December 11, 2012, Cimarex entered into a preliminary resolution of the Hitch Enterprises, Inc., et al. v. Cimarex Energy Co., et al. (Hitch)

litigation matter for $16.4 million. Hitch was filed as a statewide royalty putative class action in the Federal District Court in Oklahoma City, Oklahoma.

The settlement was reached at a mediation, which occurred after the parties began to exchange information, including damage analyses, on

November 16, 2012. The Court has entered an order preliminarily approving the parties' settlement. The deadline for putative class members to opt out

of the settlement class was February 15, 2013, and less than 1/2% of the class members opted out. The Court will hold the settlement fairness hearing on

March 22, 2013. In the fourth quarter of 2012, we accrued $16.4 million for this matter.

H.B. Krug, et al. versus H&P

 In January 2009, the Tulsa County District Court issued a judgment totaling $119.6 million in the H.B. Krug, et al. versus Helmerich & Payne,

 Inc. (H&P) case. This lawsuit originally was filed in 1998 and addressed H&P's conduct pertaining to a 1989 take-or-pay settlement, along with

potential drainage and other related issues. Pursuant to the 2002 spin-off transaction to shareholders of H&P, by which Cimarex became a publiclytraded entity, Cimarex assumed the assets and liabilities of H&P's exploration and production business, including this lawsuit. In 2008 we recorded a

litigation expense of $119.6 million for

83

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

13. COMMITMENTS AND CONTINGENCIES (Continued)

this lawsuit. We have accrued additional post-judgment interest and costs during the appeal of the District Court's judgment.

 On August 18, 2011, the Oklahoma Court of Appeals issued an Opinion regarding the Krug litigation. The Oklahoma Court of Appeals reversed

and remanded the $112.7 million disgorgement of profits award, holding the District Court erred in failing to make the required findings of fact and

conclusions of law. In all other respects, the Court of Appeals affirmed the judgment, including damages of $6.845 million. On February 13, 2012 the

Oklahoma Supreme Court granted Cimarex's Petition for Certiorari, which requested a review of the affirmed portion of the judgment. We are awaiting

a ruling from the Oklahoma Supreme Court, and the final outcome cannot be determined at this time. If the District Court's original judgment is

ultimately affirmed in its entirety, the $119.6 million, plus the then-determined amount of post-judgment interest and costs would become payable.

 The following table reflects the change in the noncurrent accrued liability for this lawsuit for the years ending December 31:

14. PROPERTY SALES AND ACQUISITIONS

 In 2012, we sold interests in non-core oil and gas assets for $306 million. Of this total, $290 million, which occurred in the fourth quarter, was

related to non-core oil and gas assets located in Texas. We had property acquisitions of $33.5 million during 2012, most of which were in the Permian

basin.

 During 2011, we sold all of our interests in assets located in Sublette County, Wyoming for $195.5 million (after purchase price adjustments). The

assets sold principally consisted of a gas processing plant under construction and related assets ($111.4 million) and 210 Bcf of proved undeveloped

gas reserves ($84.1 million). Total property acquisitions during 2011 were approximately $45.4 million. Of our total acquisitions, $42.2 million was in

our western Oklahoma Cana-Woodford shale play.

 In 2010 we sold various interests in oil and gas properties for $28.2 million, most of which were located in Mississippi.

 We intend to continue to actively evaluate acquisitions and dispositions relative to our property holdings, particularly in our Cana-Woodford shale

play and in the Permian Basin.

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES

 Oil and Gas Operations—The following table contains direct revenue and cost information relating to our oil and gas exploration and production

activities for the periods indicated. We have no long-term

84

(in thousands) 2012 2011 2010

Beginning of period $ 146,310 $ 137,611 $ 128,759

Accrued post-judgment interest and costs 9,064 8,699 8,852

End of period $ 155,374 $ 146,310 $ 137,611

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

supply or purchase agreements with governments or authorities in which we act as producer. Income tax expense related to our oil and gas operations

are computed using the effective tax rate for the period:

 Costs Incurred—The following table sets forth the capitalized costs incurred in our oil and gas production, exploration, and development

activities:

85

Years Ended December 31,

(in thousands) 2012 2011 2010

Oil, gas and NGL revenues from production $ 1,581,650 $ 1,703,520 $ 1,558,562

Less operating costs and income taxes:

Depletion 484,529 367,509 282,374

Asset retirement obligation 13,019 11,451 7,322

Production 258,584 247,048 194,015

Transportation 57,354 56,711 45,982

Taxes other than income 86,994 126,468 121,781

Income tax expense 251,215 331,082 336,530

1,151,695 1,140,269 988,004

Results of operations from oil and gas producing activities $ 429,955 $ 563,251 $ 570,558

Amortization rate per Mcfe $ 2.11 $ 1.70 $ 1.30

Years Ended December 31,

(in thousands) 2012 2011 2010

Costs incurred during the year:

Acquisition of properties

Proved $ 2,645 $ 23,071 $ 15,220

Unproved 117,695 168,238 136,929

Exploration 109,169 82,531 119,577

Development 1,426,918 1,351,617 766,980

Oil and gas expenditures 1,656,427 1,625,457 1,038,706

Property sales (305,862) (117,344) (28,235)

1,350,565 1,508,113 1,010,471

Asset retirement obligation, net 12,525 63,246 9,321

$ 1,363,090 $ 1,571,359 $ 1,019,792

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

 Aggregate Capitalized Costs—The table below reflects the aggregate capitalized costs relating to our oil and gas producing activities at

December 31, 2012:

 Costs Not Being Amortized—The following table summarizes oil and gas property costs not being amortized at December 31, 2012, by year that

the costs were incurred:

 Costs not being amortized include the costs of unevaluated wells in progress and other properties. On a quarterly basis, such costs are evaluated

for inclusion in the costs to be amortized resulting from the determination of proved reserves, impairments, or reductions in value. To the extent that the

evaluation indicates these properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized. Abandonments of

unproved properties are accounted for as an adjustment to capitalized costs related to proved oil and gas properties, with no losses recognized.

 Oil and Gas Reserve Information—Proved reserve quantities are based on estimates prepared by Cimarex in accordance with guidelines

established by the Securities and Exchange Commission (SEC).

 Reserve definitions comply with definitions of Rules 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 our company. The technical employee

primarily responsible for overseeing the reserve estimation process is our company'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 eighteen years of practical

experience in reserve evaluation. He has been directly involved in the annual reserve reporting process of Cimarex since 2002 and has served in his

current role for the past eight years.

 DeGolyer and MacNaughton, an independent petroleum engineering consulting firm, reviewed greater than 80% of the total future net revenue

discounted at 10% attributable to the total interests owned by Cimarex as of December 31, 2012. 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 thirty-eight

years of experience in oil and gas reservoir studies and evaluations.

86

(in thousands)

Proved properties $ 11,258,748

Unproved properties and properties under development, not being amortized 645,078

11,903,826

Less-accumulated depreciation, depletion and amortization (6,899,057)

Net oil and gas properties $ 5,004,769

(in thousands)

2012 $ 321,762

2011 170,861

2010 49,217

2009 and prior 103,238

$ 645,078

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

 Proved reserves are those quantities of oil, NGL and gas, which, by analysis of geosciences and engineering data, can be estimated with reasonable

certainty to be economically producible—from a given date forward, from known reservoirs, and under existing economic conditions, operating

methods, and government regulations—prior to the time at which contracts providing the right to operate expire, unless evidence indicates that renewal

is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation. The project to extract the hydrocarbons

must have commenced or the operator must be reasonably certain that it will commence the project within a reasonable time.

 There are numerous uncertainties inherent in estimating quantities of proved reserves and projecting future rates of production and the timing of

development expenditures. The estimation of our proved reserves employs one or more of the following: production trend extrapolation, analogy,

volumetric assessment and material balance analysis. Techniques including review of production and pressure histories, analysis of electric logs and

fluid tests, and interpretations of geologic and geophysical data are also involved in this estimation process.

87

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

 The following reserve data represents estimates only and should not be construed as being exact.

 During 2012, we added 757.3 Bcfe of proved reserves through extensions and discoveries. In our western Oklahoma Cana-Woodford shale area,

we added 202.5 Bcfe from infill wells drilled and 315.9 Bcfe of proved undeveloped (PUD) reserves. Development drilling in the Permian Basin added

229.2 Bcfe.

 Approximately 72 Bcfe of the 257.3 Bcfe net negative revisions during 2012 relate to production performance of certain wells recently drilled in

Gas

(MMcf)

Oil

(MBbl)

NGL

(MBbl)

Total Gas

Equivalents

(MMcfe)

Total proved reserves:

December 31, 2009 1,186,585 56,764 1,253 1,534,689

Revisions of previous estimates (24,756) 3,279 25,588 148,440

Extensions and discoveries 216,338 14,133 18,419 411,650

Purchases of reserves 12,834 104 322 15,391

Production (132,813) (9,844) (4,272) (217,510)

Sales of properties (4,022) (780) — (8,703)

December 31, 2010 1,254,166 63,656 41,310 1,883,957

Revisions of previous estimates (35,981) (2,062) 6,865 (7,160)

Extensions and discoveries 321,419 21,253 23,019 587,049

Purchases of reserves 13,480 308 1,430 23,910

Production (120,113) (9,778) (6,236) (216,198)

Sales of properties (216,530) (1,055) (573) (226,293)

December 31, 2011 1,216,441 72,322 65,815 2,045,265

Revisions of previous estimates (211,401) (3,154) (4,492) (257,276)

Extensions and discoveries 372,459 27,817 36,324 757,307

Purchases of reserves 50 14 2 145

Production (118,495) (11,516) (6,952) (229,299)

Sales of properties (7,191) (7,562) (788) (57,298)

December 31, 2012 1,251,863 77,921 89,909 2,258,844

Proved developed reserves:

December 31, 2009 865,720 52,636 1,253 1,189,054

December 31, 2010 911,898 60,231 31,051 1,459,590

December 31, 2011 989,511 68,250 44,755 1,667,541

December 31, 2012 985,352 73,524 63,757 1,809,037

Proved undeveloped reserves:

December 31, 2009 320,865 4,128 — 345,635

December 31, 2010 342,268 3,425 10,259 424,367

December 31, 2011 226,930 4,072 21,060 377,724

December 31, 2012 266,511 4,397 26,152 449,807

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
our Cana-Woodford shale project. PUD reserve additions

88

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

in extensions and discoveries for 2012 now reflect revised expectations of future production performance. The remainder of the net negative revision

primarily resulted from decreases in prices (91 Bcfe), increases in operating expenses (21 Bcfe) which shortened the economic lives, adjustments to

previously PUD reserves (25 Bcfe) and the removal of PUD locations due to altered future drilling plans (42 Bcfe).

 In 2011, we added 587.0 Bcfe of proved reserves through extensions and discoveries. These additions were also primarily due to wells drilled and

PUD reserves added in our Cana-Woodford shale area and in the Permian Basin. Net negative revisions during 2011 were negligible.

 During 2010, we added 411.7 Bcfe of proved reserves through extensions and discoveries, primarily as the result of wells drilled in our CanaWoodford shale area, in the Permian Basin and in southeast Texas.

 Net revisions during 2010 added 148.4 Bcfe, which included 44.8 Bcfe driven by higher oil and gas prices. The rest of these net revisions relate

primarily to increases in our NGL volumes stemming from new gas processing contracts and certain contractual amendments.

 At December 31, 2012 we had PUD reserves of 450 Bcfe, up 72 Bcfe from 378 Bcfe of PUDs at December 31, 2011. Changes in our PUD

reserves are summarized in the table below (in Bcfe):

 The 316 Bcfe of PUD additions occurred in our western Oklahoma, Cana Woodford shale play. All of our PUDs are associated with this play. We

have no PUD reserves that have remained undeveloped for five years or more after initial disclosure. We have no PUD reserves whose scheduled delay

to initiation of development is beyond five years of initial booking.

 PUD reserves at December 31, 2011 and 2010 totaled 378 Bcfe and 424 Bcfe, respectively. The majority of the 2011 reserves were associated

with our western Oklahoma, Cana-Woodford shale play. Roughly half of our 2010 PUD reserves were associated with a gas development project in

Sublette County, Wyoming. These assets were sold in August, 2011. Please see Note 14 for further information on this sale.

 Standardized Measure of Future Net Cash Flows— The "Standardized Measure of Discounted Future Net Cash Flows Relating to Proved Oil

and Gas Reserves" (Standardized Measure) is calculated in accordance with guidance provided by the FASB. The Standardized Measure does not

purport, nor should it be interpreted, to present the fair value of a company's proved oil and gas reserves. Fair value would require, among other things,

consideration of expected future economic and operating conditions, a discount factor more representative of the time value of money, and risks inherent

in reserve estimates.

 Under the Standardized Measure, future cash inflows are based upon the forecasted future production of year-end proved reserves. Future cash

inflows are then reduced by estimated future production and development costs to determine net pre-tax cash flow. Future income taxes are computed

by applying the statutory tax rate to the excess of pre-tax cash flow over our tax basis in the associated oil and gas properties. Tax credits and permanent

differences are also considered in the future income tax

89

PUDs at December 31, 2011 377.7

Converted to developed (176.4)

Additions 315.9

Net revisions (67.4)

PUDs at December 31, 2012 449.8

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

calculation. Future net cash flow after income taxes is discounted using a 10% annual discount rate to arrive at the Standardized Measure.

 The following summary sets forth our Standardized Measure:

 The following are the principal sources of change in the Standardized Measure:

 Impact of Pricing—The estimates of cash flows and reserve quantities shown above are based upon the unweighted average first-day-of-themonth prices. If future gas sales are covered by contracts at specified prices, the contract prices would be used. Fluctuations in prices are due to supply

and demand and are beyond our control.

90

December 31,

(in thousands) 2012 2011 2010

Cash inflows $ 12,384,251 $ 13,824,129 $ 11,355,448

Production costs (3,684,875) (3,999,352) (3,615,419)

Development costs (562,994) (555,963) (426,914)

Income tax expense (2,368,115) (2,938,590) (2,243,558)

Net cash flow 5,768,267 6,330,224 5,069,557

10% annual discount rate (2,859,566) (3,190,474) (2,554,280)

Standardized measure of discounted future net cash

flow $ 2,908,701 $ 3,139,750 $ 2,515,277

December 31,

(in thousands) 2012 2011 2010

Standardized Measure, beginning of period $ 3,139,750 $ 2,515,277 $ 1,667,955

Sales, net of production costs (1,178,718) (1,268,175) (1,192,798)

Net change in sales prices, net of production costs (957,606) 448,727 806,109

Extensions and discoveries, net of future production and development

costs 1,707,024 1,662,706 1,186,787

Changes in future development costs 146,808 (57,847) (40,748)

Previously estimated development costs incurred during the period 148,976 42,492 56,848

Revision of quantity estimates (457,013) (16,269) 300,676

Accretion of discount 459,490 361,662 228,593

Change in income taxes 197,916 (353,804) (483,370)

Purchases of reserves in place 572 41,854 21,076

Sales of properties (214,746) (123,870) (20,981)

Change in production rates and other (83,752) (113,003) (14,870)

Standardized Measure, end of period $ 2,908,701 $ 3,139,750 $ 2,515,277

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

15. UNAUDITED SUPPLEMENTAL OIL AND GAS DISCLOSURES (Continued)

 The following average prices were used in determining the Standardized Measure as of:

 Companies that follow the full cost accounting method are required to make quarterly "ceiling test" calculations. This test ensures that total

capitalized costs for oil and gas properties (net of accumulated DD&A and deferred income taxes) do not exceed the sum of the present value

discounted at 10% of estimated future net cash flows from proved reserves, the cost of properties not being amortized, the lower of cost or estimated

fair value of unproven properties included in the costs being amortized, and all related tax effects. We currently do not have any unproven properties that

are being amortized. We calculate the projected income tax effect using the "year-by-year" method for purposes of the supplemental oil and gas

disclosures and use the "short-cut" method for the ceiling test calculation. Application of these rules during periods of relatively low commodity prices,

even if of short-term duration, may result in write-downs.

16. UNAUDITED SUPPLEMENTAL QUARTERLY FINANCIAL DATA

91

December 31,

2012 2011 2010

Gas price per Mcf $ 2.27 $ 3.79 $ 4.12

Oil price per Bbl $ 88.91 $ 89.64 $ 75.35

NGL price per Bbl $ 29.12 $ 41.70 $ 33.89

2012 First Second Third Fourth

(in thousands, except for per share data)

Revenues $ 423,036 $ 353,122 $ 406,912 $ 440,868

Expenses, net 316,929 288,820 322,650 341,716

Net income (loss) $ 106,107 $ 64,302 $ 84,262 $ 99,152

Earnings (loss) per share to common stockholders:

Basic:

Distributed $ 0.12 $ 0.12 $ 0.12 $ 0.12

Undistributed 1.12 0.63 0.85 1.02

$ 1.24 $ 0.75 $ 0.97 $ 1.14

Diluted:

Distributed $ 0.12 $ 0.12 $ 0.12 $ 0.12

Undistributed 1.11 0.62 0.85 1.02

$ 1.23 $ 0.74 $ 0.97 $ 1.14

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

CIMAREX ENERGY CO.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

16. UNAUDITED SUPPLEMENTAL QUARTERLY FINANCIAL DATA (Continued)

 The sum of the individual quarterly net income per common share amounts may not agree with year-to-date net income per common share because

each quarter's computation is based on the number of shares outstanding at the end of the applicable quarter using the two-class method.

92

2011 First Second Third Fourth

(in thousands, except for per share data)

Revenues $ 426,596 $ 467,213 $ 433,809 $ 430,271

Expenses, net 308,434 300,464 305,657 313,402

Net income (loss) $ 118,162 $ 166,749 $ 128,152 $ 116,869

Earnings (loss) per share to common stockholders:

Basic:

Distributed $ 0.10 $ 0.10 $ 0.10 $ 0.10

Undistributed 1.28 1.85 1.39 1.26

$ 1.38 $ 1.95 $ 1.49 $ 1.36

Diluted:

Distributed $ 0.10 $ 0.10 $ 0.10 $ 0.10

Undistributed 1.27 1.84 1.39 1.26

$ 1.37 $ 1.94 $ 1.49 $ 1.36

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE 

 None.

ITEM 9A. CONTROLS AND PROCEDURES 

EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES

 Cimarex's management, 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 Exchange Act Rules 13a-15(e)) as of December 31, 2012 and concluded

that the disclosure controls and procedures are effective in providing reasonable assurance that the information required to be disclosed in reports filed

with the SEC is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms. The disclosure controls

and procedures are also designed to provide reasonable assurance that such information is accumulated and communicated to our management,

including the CEO and CFO, as appropriate to allow such persons to make 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 our most recent fiscal quarter that has materially affected,

or is reasonably likely to materially affect, our internal control over financial reporting.

MANAGEMENT'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

 The management of Cimarex is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in

Rule 13a-15(f) under the Exchange Act). The company's internal control over financial reporting is a process designed under the supervision of the

CEO and CFO to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance

with generally accepted accounting principles.

 Because of the inherent limitations of internal control over financial reporting, misstatements may not be prevented or detected on a timely basis.

Also, projections of any evaluation of the effectiveness of the internal control over financial reporting to future periods are subject to the risk that the

controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 As of December 31, 2012, management assessed the effectiveness of the company's internal control over financial reporting based on the criteria

established in "Internal Control—Integrated Framework", issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based

on that assessment, the company maintained effective internal control over financial reporting as of December 31, 2012.

93

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Report of Independent Registered Public Accounting Firm 

The Board of Directors and Stockholders

Cimarex Energy Co.:

 We have audited Cimarex Energy Co. and subsidiaries (the Company) internal control over financial reporting as of December 31, 2012, based on

criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission

(COSO). Cimarex Energy Co.'s management is responsible for maintaining effective internal control over financial reporting and for its assessment of

the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial

Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

 We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards

require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was

maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a

material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also

included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for

our opinion.

 A company's internal control over financial reporting is a process designed 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. A company's

internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail,

accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are

recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and

expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide

reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a

material effect on the financial statements.

 Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any

evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the

degree of compliance with the policies or procedures may deteriorate.

 In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2012, based

on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway

Commission.

 We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated

balance sheets of the Company as of December 31, 2012 and 2011, and the related consolidated statements of income and comprehensive income,

stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and our report dated February 26, 2013

expressed an unqualified opinion on those consolidated financial statements.

KPMG LLP

Denver, Colorado

February 26, 2013

94

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

ITEM 9B. OTHER INFORMATION 

 None.

95

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

PART III 

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF CIMAREX 

 Information concerning the directors of Cimarex is incorporated by reference from the Cimarex Energy Co. definitive Proxy Statement for the

May 15, 2013 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission no later than

April 30, 2013. Information concerning the executive officers of Cimarex is set forth under Item 4A in Part I of this report.

ITEM 11. EXECUTIVE COMPENSATION 

 Information required under this item is incorporated by reference from the Cimarex Energy Co. definitive Proxy Statement for the May 15, 2013

Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2013.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT 

 Information required under this item is incorporated by reference from the Cimarex Energy Co. definitive Proxy Statement for the May 15, 2013

Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2013.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS 

 Information required under this item is incorporated by reference from the Cimarex Energy Co. definitive Proxy Statement for the May 15, 2013

Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2013.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES 

 Information required under this item is incorporated by reference from the Cimarex Energy Co. definitive Proxy Statement for the May 15, 2013

Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and Exchange Commission no later than April 30, 2013.

96

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

PART IV 

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES 

 Exhibits not incorporated by reference to a prior filing are designated by an asterisk (*) and are filed herewith; all exhibits not so designated are

incorporated by reference to a prior SEC filing as indicated.

97

Page

(a)(1) The following financial statements are included in Item 8 to this 10-K:

Consolidated balance sheets as of December 31, 2012 and 2011 60

Consolidated statements of income and comprehensive income for the years ended December 31, 2012, 2011, and 2010 61

Consolidated statements of cash flows for the years ended December 31, 2012, 2011, and 2010 62

Consolidated statements of stockholders' equity for the years ended December 31, 2012, 2011, and 2010 63

Notes to consolidated financial statement 64

(2) Financial statement schedules—None

(3) Exhibits:

Exhibit Title

3.1 Amended and Restated Certificate of Incorporation of Cimarex Energy Co. (filed as Exhibit 3.1 to

Registrant's Form 8-K (file no. 001-31446) dated June 7, 2005 and incorporated herein by reference).

 

3.2 Amended and Restated By-laws of Cimarex Energy Co. (filed as Exhibit 3.2 to the Registrant's Current

Report on Form 8-K dated August 30, 2011 and incorporated herein by reference).

 

4.1 Specimen Certificate of Cimarex Energy Co. common stock (filed as Exhibit 4.3 to Registration Statement

on Form S-3 filed September 17, 2012 (Registration No. 333-183939) and incorporated herein by

reference).

 

4.2 Debt Securities Indenture dated as of April 5, 2012, by and among Cimarex Energy Co. and U.S. Bank

National Association, as trustee included as Exhibit 4.1 to Registrant's Current Report on Form 8-K filed on

April 5, 2012 and incorporated herein by reference.

 

4.3 First Supplemental Indenture dated as of April 5, 2012, by and among Cimarex Energy Co., the Subsidiary

Guarantors party thereto and U.S. Bank National Association, as trustee included as Exhibit 4.2 to

Registrant's Current Report on Form 8-K filed on April 5, 2012 and incorporated herein by reference.

 

4.4 Form of 5.875% Senior Notes due 2022 included in Exhibit 4.3 to the Registrant's Current Report on

Form 8-K filed on April 5, 2012 and incorporated herein by reference.

 

10.1 Credit Agreement dated as of July 14, 2011, among Cimarex, the Administrative Agent, the Co-Syndication

Agents, the Co-Documentation Agents and the Lenders filed on July 18, 2011 as Exhibit 10.l to the

Registrant's Current Report on Form 8-K and incorporated herein by reference.

 

10.2 Employment Agreement dated September 1, 1992 between Key Production Company, Inc. and F.H. Merelli

(filed as Exhibit 10.5 to the Registration Statement on Form S-4 dated May 9, 2002 (Registration No. 333-

87948) and incorporated herein by reference).

 

10.3 Amendment to Employment Agreement effective January 1, 2009 between Cimarex Energy Co. and F. H.

Merelli (filed as Exhibit 10.7 to the Annual Report on Form 10-K filed on February 27, 2009 (Commission

File No. 001-31446) and incorporated herein by reference).

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

98

Exhibit Title

 

10.4 Employment Agreement, dated September 7, 1999, by and between Paul Korus and Key Production

Company, Inc. (filed as Exhibit 10.6 to the Registration Statement on Form S-4 dated May 9, 2002

(Registration No. 333-87948) and incorporated herein by reference).

 

10.5 Amendment to Employment Agreement effective January 1, 2009 between Cimarex Energy Co. and Paul

Korus (filed as Exhibit 10.9 to the Annual Report on Form 10-K filed on February 27, 2009 (Commission

File No. 001-31446) and incorporated herein by reference).

 

10.6 Employment Agreement, dated October 25, 1993, by and between Thomas E. Jorden and Key Production

Company, Inc. (filed as Exhibit 10.7 to the Registration Statement on Form S-4 dated May 9, 2002

(Registration No. 333-87948) and incorporated herein by reference).

 

10.7 Amendment to Employment Agreement effective January 1, 2009 between Cimarex Energy Co. and

Thomas E. Jorden (filed as Exhibit 10.11 to the Annual Report on Form 10-K filed on February 27, 2009

(Commission File No. 001-31446) and incorporated herein by reference).

 

10.8 Employment Agreement, dated February 2, 1994, by and between Stephen P. Bell and Key Production

Company, Inc. (filed as Exhibit 10.8 to the Registration Statement on Form S-4 dated May 9, 2002

(Registration No. 333-87948) and incorporated herein by reference).

 

10.9 Amendment to Employment Agreement effective January 1, 2009 between Cimarex Energy Co. and

Stephen P. Bell (filed as Exhibit 10.13 to the Annual Report on Form 10-K filed on February 27, 2009

(Commission File No. 001-31446) and incorporated herein by reference).

 

10.10 Employment Agreement, dated March 11, 1994, by and between Joseph R. Albi and Key Production

Company, Inc. (filed as Exhibit 10.9 to the Registration Statement on Form S-4 dated May 9, 2002

(Registration No. 333-87948) and incorporated herein by reference).

 

10.11 Amendment to Employment Agreement effective January 1, 2009 between Cimarex Energy Co. and Joseph

R. Albi (filed as Exhibit 10.15 to the Annual Report on Form 10-K filed on February 27, 2009

(Commission File No. 001-31446) and incorporated herein by reference).

 

10.12 Amended and Restated 2002 Stock Incentive Plan of Cimarex Energy Co. effective January 1, 2009 (filed

as Exhibit 10.16 to the Annual Report on Form 10-K filed on February 27, 2009 (Commission File

No. 001-31446) and incorporated herein by reference).

 

10.13 2011 Equity Incentive Plan adopted May 18, 2011 (filed as Appendix A to the Definitive Proxy Statement

14-A filed on March 23, 2011 (Commission File No. 001-31446) and incorporated herein by reference).

 

10.14 Form of Notice of Grant of Award of Performance Stock and Award Agreement (filed as Exhibit 10.2 to

Registrant's Quarterly Report on Form 10-Q filed on August 4, 2011 (File no. 001-31446) and incorporated

herein by reference).

 

10.15 Form of Notice of Grant of Restricted Stock and Award Agreement (filed as Exhibit 10.3 to Registrant's

Quarterly Report on Form 10-Q filed on August 4, 2011 (File no. 001-31446) and incorporated herein by

reference).

 

10.16 Form of Notice of Grant of Nonqualified Stock Option and Award Agreement (filed as Exhibit 10.4 to

Registrant's Quarterly Report on Form 10-Q filed on August 4, 2011 (File no. 001-31446) and incorporated

herein by reference).

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

Exhibit Title

10.17 Deferred Compensation Plan for Nonemployee Directors adopted May 19, 2004, as amended and restated

effective January 1, 2009 (filed as Exhibit 10.18 to the Annual Report on Form 10-K filed on February 27,

2009 (Commission File No. 001-31446) and incorporated herein by reference).

 

10.18 Cimarex Energy Co. Supplemental Savings Plan (amended and restated, effective January 1, 2009) (filed as

Exhibit 10.19 to the Annual Report on Form 10-K filed on February 27, 2009 (Commission File No. 001-

31446) and incorporated herein by reference).

 

10.19 Cimarex Energy Co. Change in Control Severance Plan dated effective April 1, 2005. amended and restated

effective January 1, 2009 (filed as Exhibit 10.20 to the Annual Report on Form 10-K filed on February 27,

2009 (Commission File No. 001-31446) and incorporated herein by reference).

 

10.20 Form of Indemnification Agreement between Cimarex Energy Co. and each of its executive officers and

directors.*

 

14.1 Code of Ethics for Chief Executive Officer and Senior Financial Officers (filed as Exhibit 14.1 to the

Annual Report on Form 10-K for the year ended December 31, 2003, file no. 001-31446, and incorporated

herein by reference).

 

21.1 Significant Subsidiaries of the Registrant.*

 

23.1 Consent of KPMG LLP.*

 

23.2 Consent of DeGolyer and MacNaughton*

 

24.1 Power of Attorney of directors of the Registrant. *

 

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 Paul Korus, 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.*

 

32.2 Certification of Paul Korus, Chief Financial Officer of Cimarex Energy Co., pursuant to Section 906 of the

Sarbanes-Oxley Act of 2002.*

 

99.1 Letter dated January 25, 2013 from DeGolyer and MacNaughton, independent petroleum engineering

consulting firm, reporting the results of its audit of Cimarex reserves as of December 31, 2012 of certain

selected properties.*

 

101.INS XBRL Instance Document

 

101.SCH XBRL Taxonomy Extension Schema Document

 

101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

 

101.LAB XBRL Taxonomy Extension Label Linkbase Document

 

101.PRE XBRL Taxonomy Extension Presentation Linkbase Document

 

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
99

101.DEF XBRL Taxonomy Extension Definition Linkbase Document Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

SIGNATURE 

 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.

Date: February 26, 2013

 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the

registrant and in the capacities and on the dates indicated.

100

CIMAREX ENERGY CO.

By: /s/ THOMAS E. JORDEN

Thomas E. Jorden

Chairman, President and Chief Executive Officer

Signature Title Date

/s/ THOMAS E. JORDEN

Thomas E. Jorden

Chairman of the Board and Director, President and

Chief Executive Officer (Principal Executive Officer)

February 26, 2013

*

Attorney-in-Fact 

Joseph R. Albi

Director, Executive Vice President and Chief Operating

Officer

February 26, 2013

/s/ PAUL KORUS

Paul Korus

Senior Vice President and Chief Financial Officer

(Principal Financial Officer)

February 26, 2013

/s/ JAMES H. SHONSEY

James H. Shonsey

Vice President, Chief Accounting Officer and

Controller (Principal Accounting Officer)

February 26, 2013

*

Attorney-in-Fact 

Jerry Box

Director February 26, 2013

*

Attorney-in-Fact 

Hans Helmerich

Director February 26, 2013

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Table of Contents

101

Signature Title Date

*

Attorney-in-Fact 

David A. Hentschel Director February 26, 2013

*

Attorney-in-Fact 

Harold R. Logan, Jr. Director February 26, 2013

*

Attorney-in-Fact 

Floyd R. Price Director February 26, 2013

*

Attorney-in-Fact 

Monroe W. Robertson Director February 26, 2013

*

Attorney-in-Fact 

Michael J. Sullivan Director February 26, 2013

*

Attorney-in-Fact 

L. Paul Teague Director February 26, 2013

* By: /s/ PAUL KORUS

Paul Korus

Attorney-in-Fact

Senior Vice President and Chief Financial

Officer (Principal Financial Officer)

February 26, 2013

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
EXHIBIT 10.20

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT (this “Agreement”) is made and entered into as of the day of , 20 , by and

between Cimarex Energy Co., a Delaware corporation (the “ Company”), and (the “ Indemnitee”).

RECITALS:

A. The Company desires the benefits of having Indemnitee serve as a director and/or officer secure in the knowledge that any expenses,

liability and/or losses incurred by Indemnitee in Indemnitee’s good faith service to the Company will be borne by the Company or its successors and assigns.

B. Indemnitee is willing to serve in Indemnitee’s position with the Company only on the condition that Intemnitee be indemnified for such

expenses, liability and losses.

C. The Company’s Certificate of Incorporation and By-laws allow and require the Company to indemnify its directors, officers and agents to

the maximum extent permitted under Delaware Law.

D. Indemnitee desires to have the benefits of an agreement with the Company covering Indemnitee’s rights to indemnification in order to

provide greater certainty as to the scope, permanency and enforceability of such rights, and the Company is willing to enter into such an agreement to enhance

its ability to attract and retain directors and officers.

NOW, THEREFORE, in consideration of Indemnitee’s agreement to serve as a director and/or officer of the Company, the parties hereby agree as

follows:

1. Definitions. For purposes of this Agreement:

1.1 “Agent” shall mean any person who is or was a director, officer, employee or agent of the Company or a subsidiary of the

Company whether serving in such capacity or as a director, officer, employee, agent, fiduciary or other official of another Enterprise (whether for profit or not

for profit) at the request of, for the convenience of, or to represent the interests of the Company or a subsidiary of the Company.

1.2 “Change of Control” shall have the same meaning as defined in the Cimarex 2002 Stock Incentive Plan, as it may be amended

from time to time.

1.3 “Delaware Law” means the Delaware General Corporation Law, as amended and in effect from time to time or any successor or

other statutes of Delaware having similar import and effect.

1.4 “Enterprise” shall mean the Company and any other corporation, partnership, joint venture, trust, employee benefit plan or other

entity that Indemnitee is or was serving at the request of, for the convenience of, or to represent the interests of the Company as a director, officer, employee,

agent, fiduciary or other official.

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
1.5 “Expenses” shall be broadly construed and shall include, without limitation, (a) all direct and indirect costs incurred, paid or

accrued, (b) all attorneys’ fees, retainers, court costs, transcripts, fees of experts, witness fees, travel expenses, food and lodging expenses while traveling,

duplicating costs, printing and binding costs, telephone charges, postage, delivery service, freight or other transportation fees and expenses, (c) all other

disbursements and out-of-pocket expenses, (d) amounts paid in settlement, to the extent not prohibited by Delaware Law, (e) reasonable compensation for time

spent by Indemnitee for which Indemnitee is otherwise not compensated by the Company or any third party, actually and reasonably incurred in connection

with or arising out of a Proceeding, including a Proceeding by Indemnitee to establish or enforce a right to indemnification under this Agreement, applicable law

or otherwise, and (f) any and all federal, state, local or foreign taxes imposed on Indemnitee as a result of the actual or deemed receipt of any payments under

this Agreement, including all interest, assessments and other charges paid or payable in connection with or in respect of such Expenses.

1.6 “Independent Counsel” shall mean a law firm or a member of a law firm that neither is presently nor in the past five years has

been retained to represent: (a) the Company, an affiliate of the Company or Indemnitee in any matter material to either party or (b) any other party to the

Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person

who, under the applicable standards of professional conduct then prevailing would have a conflict of interest in representing either the Company or Indemnitee

in an action to determine Indemnitee’s right to indemnification under this Agreement.

1.7 “Independent Director” shall mean a director of the Company who is not and was not a party to the Proceeding in respect of which

indemnification is being sought by Indemnitee.

1.8 “Liabilities” shall mean liabilities of any type whatsoever, including, but not limited to, judgments or fines, ERISA or other

excise taxes and penalties, and amounts paid in settlement (including all interest, assessments or other charges paid or payable in connection with any of the

foregoing) actually and reasonably incurred by Indemnitee in connection with a Proceeding.

1.9 “Proceeding” shall mean any pending, threatened or completed action, hearing, suit or any other proceeding, whether civil,

criminal, arbitrative, administrative, investigative or any alternative dispute resolution mechanism, including without limitation any such Proceeding brought

by or in the right of the Company.

2. Employment Rights and Duties. Subject to any other obligations imposed on either of the parties by contract or by law, and with the

understanding that this Agreement is not intended to confer employment rights on either party which they did not possess on the date of its

execution, Indemnitee agrees to serve as a director or officer so long as Indemnitee is duly appointed or elected and qualified in accordance with the applicable

provisions of the Certificate of Incorporation and By-laws of the Company or any subsidiary of the Company and until such time as Indemnitee resigns or

fails to stand for election or until Indemnitee’s employment, if any, terminates. Indemnitee may from time to time also perform other services at the request, or

for

2

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
the convenience of, or otherwise benefiting the Company. Indemnitee may at any time and for any reason resign or be removed from such position (subject to

any other contractual obligation or other obligation imposed by operation of law), in which event the Company shall have no obligation under this Agreement to

continue Indemnitee in any such position.

3. Indemnification.

3.1 The Company shall indemnify Indemnitee to the fullest extent authorized or permitted by Delaware Law, and as Delaware Law

may from time to time be amended (but, in the case of any such amendment, only to the extent such amendment permits the Company to provide broader

indemnification rights under Delaware Law), against any and all Liabilities and Expenses. The right to indemnification conferred in this Agreement shall be

presumed to have been relied upon by Indemnitee in serving or continuing to serve the Company as a director and/or officer and shall be enforceable as a

contract right.

3.2 In addition to, and without regard to any limitations on, the indemnification provided for in paragraph 3.1 of this Agreement, the

Company shall and hereby does indemnify and hold harmless Indemnitee against any and all Liabilities and Expenses actually and reasonably incurred by

Indemnitee or on Indemnitee’s behalf if, in connection with Indemnitee’s service as an Agent, Indemnitee is, or is threatened to be made, a party to or

participant in any Proceeding. The only limitations that shall exist upon the Company’s obligations pursuant to this paragraph 3.2 shall be that the Company

shall not be obligated to make any payment to Indemnitee that is finally determined (under the procedures, and subject to the presumptions, set forth in

Sections 5 and 6 hereof) to be unlawful or not otherwise permitted pursuant to the terms of this Agreement.

4. Advancement of Expenses.

4.1 All Expenses incurred by or on behalf of Indemnitee shall be advanced by the Company to Indemnitee within twenty days after

the receipt by the Company of a written request for such advance which may be made from time to time, whether prior to or after final disposition of a

Proceeding (unless there has been a final determination by a court of competent jurisdiction that Indemnitee is not entitled to be indemnified for such

Expenses). Indemnitee’s entitlement to advancement of Expenses shall include those incurred in connection with any Proceeding by Indemnitee seeking a

determination, an adjudication or an award in arbitration pursuant to this Agreement. The requests shall reasonably evidence the Expenses incurred by

Indemnitee in connection therewith. Indemnitee hereby undertakes to repay the amounts advanced if it shall ultimately be determined that Indemnitee is not

entitled to be indemnified pursuant to the terms of this Agreement.

4.2 Notwithstanding any other provision in this Agreement, to the extent that Indemnitee has been successful on the merits or

otherwise in defense of any Proceeding, Indemnitee shall be indemnified against all Expenses actually and reasonably incurred by Indemnitee in connection

therewith.

3

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
5. Procedure for Determination of Entitlement to Indemnification .

5.1 Whenever Indemnitee believes that Indemnitee is entitled to indemnification pursuant to this Agreement, Indemnitee shall submit a

written request for indemnification (the “ Indemnification Request”) to the Company to the attention of the President with a copy to the Secretary. This request

shall include documentation or information which is necessary for the determination of entitlement to indemnification and which is reasonably available to

Indemnitee. Determination of Indemnitee’s entitlement to indemnification shall be made no later than forty-five days after receipt of the Indemnification

Request. The President or the Secretary shall, promptly upon receipt of Indemnitee’s request for indemnification, advise the Board of Directors of the

Company (the “Board”) in writing that Indemnitee has made such request for indemnification.

5.2 Indemnitee shall set forth in the Indemnification Request one of the following methods to determine whether Indemnitee is entitled

to indemnification:

(a) A majority vote of Independent Directors even though less than a quorum or a written opinion of an Independent Counsel

(provided there are no such directors or if such directors so direct).

(b) In the event of a Change of Control, a written opinion of Independent Counsel.

(c) A decision by the court in which the Proceeding is or was pending upon application by Indemnitee.

(d) If the Board so agrees, by the stockholders of the Company in a vote that excludes the shares held by directors who are

not Independent Directors.

The Company agrees to bear any and all costs and expenses incurred by Indemnitee or the Company in connection with the determination of

Indemnitee’s entitlement to indemnification by any of the above forums.

6. Presumptions and Effect of Certain Proceedings. It is the intent of this Agreement to secure for Indemnitee rights of indemnity that are as

favorable as may be permitted under Delaware Law and public policy of the State of Delaware. Accordingly, the parties agree that the following presumptions

shall apply in the event of any question as to whether Indemnitee is entitled to indemnification under this Agreement:

6.1 In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such

determination shall presume that Indemnitee is entitled to indemnification under this Agreement. Anyone seeking to overcome this presumption shall have the

burden of proof and the burden of persuasion. Neither the failure of the Company (including by its Board or Independent Counsel) to have made a

determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has

met the applicable standard of conduct, nor an actual determination by the Company (including by its Board or Independent Counsel) that

4

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable

standard of conduct.

6.2 The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise shall not be imputed

to Indemnitee for purposes of determining the right to indemnification under this Agreement. It shall be presumed that Indemnitee has at all times acted in good

faith and in a manner Indemnitee reasonably believed to be in or not opposed to the best interests of the Company. Anyone seeking to overcome this

presumption shall have the burden of proof and the burden of persuasion.

6.3 Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement

to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not

privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination. Any

Independent Counsel, member of the Board or stockholder of the Company shall act reasonably and in good faith in making a determination regarding

Indemnitee’s entitlement to indemnification under this Agreement. Any costs or expenses (including attorneys’ fees and disbursements) incurred by Indemnitee

in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to

Indemnitee’s entitlement to indemnification) and the Company hereby indemnifies and agrees to hold Indemnitee harmless therefrom.

6.4 The Company acknowledges that a settlement or other disposition short of final judgment may be successful if it permits a party

to avoid expense, delay, distraction, disruption and uncertainty. In the event that any action, claim or proceeding to which Indemnitee is a party is resolved in

any manner other than by adverse judgment against Indemnitee (including, without limitation, settlement of such action, claim or proceeding with or without

payment of money or other consideration) it shall be presumed that Indemnitee has been successful on the merits or otherwise in such action, suit or

proceeding. Anyone seeking to overcome this presumption shall have the burden of proof and the burden of persuasion.

6.5 The termination of any Proceeding or of any claim, issue or matter therein, by judgment, order, settlement, arbitration award or

conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, (a) adversely affect the rights of Indemnitee to indemnification except as

indemnification may be expressly prohibited under this Agreement, (b) create a presumption that Indemnitee did not act in good faith and in a manner which

Indemnitee reasonably believed to be in or not opposed to the best interests of the Company, or (c) with respect to any criminal Proceeding, create a

presumption that Indemnitee had reasonable cause to believe that Indemnitee’s conduct was unlawful.

7. Remedies of Indemnitee in Cases of Determination not to Indemnify or to Advance Expenses .

7.1 In the event that (a) an initial determination is made that Indemnitee is not entitled to indemnification, (b) advances for Expenses

are not made when and as required by this Agreement, (c) payment has not been timely made following a determination of entitlement to

5

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
indemnification pursuant to this Agreement or (d) Indemnitee otherwise seeks enforcement of this Agreement, Indemnitee shall be entitled to a final adjudication

in an appropriate court of the State of Delaware of Indemnitee’s entitlement to such indemnification or advance. Alternatively, Indemnitee at Indemnitee’s option

may seek an award in arbitration. If the parties are unable to agree on an arbitrator, the parties shall provide the American Arbitration Association (“ AAA”)

with a statement of the nature of the dispute and the desired qualifications of the arbitrator. AAA shall then provide a list of three available arbitrators. Each

party may strike one of the names on the list, and the remaining person shall serve as the arbitrator. If both parties strike the same person, AAA shall select

the arbitrator from the other two names. The arbitration award shall be made within ninety days following the demand for arbitration. The arbitration shall

take place in Denver, Colorado, and the provisions of Delaware law shall apply to any such arbitration. The Company shall not oppose Indemnitee’s right to

seek any such adjudication or arbitration award. In any such proceeding or arbitration Indemnitee shall be presumed to be entitled to indemnification under

this Agreement and the Company shall have the burden of proof to overcome that presumption and the burden of persuasion.

7.2 An initial determination, in whole or in part, that Indemnitee is not entitled to indemnification shall create no presumption in any

judicial proceeding or arbitration that Indemnitee has not met the applicable standard of conduct for, or is otherwise not entitled to, indemnification.

7.3 If an initial determination is made or deemed to have been made pursuant to the terms of this Agreement that Indemnitee is entitled

to indemnification, the Company shall be bound by such determination in the absence of (a) a misrepresentation of a material fact by Indemnitee in the request

for indemnification or (b) a specific finding (which has become final) by a court of competent jurisdiction that all or any part of such indemnification is

expressly prohibited by law.

7.4 The Company and Indemnitee agree that a monetary remedy for breach of this Agreement, at some later date, will be inadequate,

impracticable and difficult of proof, and further agree that such breach would cause Indemnitee irreparable harm. Accordingly, the Company and Indemnitee

agree that Indemnitee shall be entitled to temporary and permanent injunctive relief to enforce this Agreement without the necessity of proving actual damages or

irreparable harm. The Company and Indemnitee further agree that Indemnitee shall be entitled to such injunctive relief, including temporary restraining

orders, preliminary injunctions and permanent injunctions, without the necessity of posting bond or other undertaking in connection therewith. Any such

requirement of bond or undertaking is hereby waived by the Company, and the Company acknowledges that in the absence of such a waiver, a bond or

undertaking may be required by the court.

7.5 The Company shall be precluded from asserting that the procedures and presumptions of this Agreement are not valid, binding

and enforceable. The Company shall stipulate in any such court or before any such arbitrator that the Company is bound by all the provisions of this

Agreement and is precluded from making any assertion to the contrary. Expenses incurred by Indemnitee in connection with Indemnitee’s request for

indemnification under, seeking enforcement of or to recover damages for breach of this Agreement shall be borne and advanced by the Company.

6

8. Non-Exclusivity; Insurance; and Subrogation .

8.1 The rights of indemnification and advancement of Expenses as provided by this Agreement shall not be deemed exclusive of any

other rights to which Indemnitee may at any time be entitled under applicable law, the Certificate of Incorporation or By-laws of the Company, any agreement,

a vote of stockholders, a resolution of the Board or otherwise. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and

every other right and remedy shall be cumulative and in addition to every other right and remedy given hereunder or now or hereafter existing at law or in

equity or otherwise. The assertion or employment of any right or remedy hereunder, or otherwise, shall not prevent the concurrent assertion or employment of

any other right or remedy.

8.2 To the extent that the Company maintains an insurance policy or policies providing liability insurance for directors, officers,

employees, or agents or fiduciaries of the Company or of any other Enterprise that such person serves at the request of the Company, Indemnitee shall be

covered by such policy or policies in accordance with its or their terms to the maximum extent of the coverage available for persons serving in a similar

capacity as Indemnitee (e.g., as a director and/or officer) under such policy or policies. If, at the time of the receipt of a notice of a claim pursuant to the terms

hereof, the Company has director and officer liability insurance in effect, the Company shall give prompt notice of the commencement of such proceeding to

the insurers in accordance with the procedures set forth in the respective policies. The Company shall thereafter take all necessary or desirable action to cause

such insurers to pay, on behalf of Indemnitee, all amounts payable as a result of such proceeding in accordance with the terms of such policies.

8.3 In the event of any payment under this Agreement, the Company shall be subrogated to the extent of such payment to all of the

rights of recovery of Indemnitee, who shall execute all papers required and take all action necessary to secure such rights, including execution of such

documents as are necessary to enable the Company to bring suit to enforce such rights.

9. Limitations on Indemnification. No indemnification pursuant to Section 3 of this Agreement shall be paid by the Company nor shall

Expenses be advanced by the Company pursuant to Section 4 of this Agreement if any of the following circumstances exist:

9.1 To the extent that Indemnitee is reimbursed pursuant to such insurance as may exist for Indemnitee’s benefit. Notwithstanding

the availability of such insurance, Indemnitee also may claim indemnification from the Company pursuant to this Agreement by assigning to the Company

any claims under such insurance to the extent Indemnitee is paid by the Company. Indemnitee shall reimburse the Company for any sums Indemnitee receives

as indemnification from other sources to the extent of any amount paid to Indemnitee for that purpose by the Company;

9.2 On account and to the extent of any wholly or partially successful claim against Indemnitee for an accounting of profits made

from the purchase or sale by Indemnitee of securities of the Company pursuant to the provisions of Section 16(b) of the Securities Exchange

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
7

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Act of 1934, as amended, and amendments thereto or similar provisions of any federal, state or local statutory law;

9.3 In connection with a judicial action by or in the right of the Company, in respect of any claim, issue or matter as to which

Indemnitee shall have been adjudged to be liable for gross negligence or intentional misconduct in the performance of Indemnitee’s duty to the Company unless,

and only to the extent that, any court in which such action was brought shall determine upon application that, despite the adjudication of liability but in view

of all the circumstances of the case, Indemnitee is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper;

9.4 If it is proved by final judgment in a court of law or other final adjudication to have been based upon or attributable to

Indemnitee’s having gained any personal profit or advantage to which Indemnitee was not legally entitled;

9.5 Except as otherwise provided in this Agreement (including paragraph 4.1), in connection with all or any part of a Proceeding

which is initiated or maintained by or on behalf of Indemnitee, or any Proceeding by Indemnitee against the Company or its directors, officers, employees or

other agents, unless (a) such indemnification is expressly required to be made by Delaware Law, (b) the Proceeding was authorized by a majority of the

Independent Directors (c) there has been a Change of Control, or (d) such indemnification is provided by the Company, in its sole discretion, pursuant to the

powers vested in the Company under Delaware Law; or

9.6 Any judgment, fine or penalty that the Company is prohibited by applicable law from paying as indemnity.

10. Duration and Scope of Agreement; Binding Effect . All agreements and obligations of the Company contained herein shall continue so long

as Indemnitee shall be subject to any possible Proceeding subject to indemnification by reason of the fact that Indemnitee is or was an Agent and shall be

applicable to Proceedings commenced or continued after execution of this Agreement, whether arising from acts or omissions occurring before or after such

execution. This Agreement shall be binding upon the Company and its successors and assigns (including any direct or indirect successor by purchase,

merger, consolidation or otherwise to all or substantially all of the business or assets of the Company) and shall inure to the benefit of Indemnitee and

Indemnitee’s spouse, assigns, heirs, devisees, executors, administrators and other legal representatives.

11. Notice by Indemnitee, Defense of Claims and Contribution .

11.1 Indemnitee agrees promptly to notify the Company in writing upon being served with any summons, citation, subpoena,

complaint, indictment, information or other document relating to any matter which may be subject to indemnification hereunder, whether civil, criminal,

arbitrative, administrative or investigative; but the omission so to notify the Company will not relieve it from any liability which it may have to Indemnitee if

such omission does not actually materially prejudice the Company’s rights and, if such omission does materially prejudice the Company’s rights, it will

relieve the Company from liability only to the

8

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
extent of such prejudice; nor will such omission relieve the Company from any liability which it may have to Indemnitee otherwise than under this Agreement.

With respect to any Proceeding:

(a) The Company shall be entitled to participate therein at its own expense;

(b) Except as otherwise provided below, to the extent that it may wish, the Company jointly with any other indemnifying

party similarly notified shall be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee. After notice from the

Company to Indemnitee of its election so to assume the defense thereof and the assumption of such defense, the Company shall not be liable to

Indemnitee under this Agreement for any attorney fees or costs subsequently incurred by Indemnitee in connection with Indemnitee’s defense except as

otherwise provided below. Indemnitee shall have the right to employ separate counsel in such Proceeding but the fees and expenses of such counsel

incurred after notice from the Company of its assumption of the defense thereof and the assumption of such defense shall be at the expense of

Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have reasonably concluded

that there may be a conflict of interest between the Company and Indemnitee in the conduct of the defense of such action or that the Company’s

counsel may not be adequately representing Indemnitee or (iii) the Company shall not in fact have employed counsel to assume the defense of such

action, in each of which cases the fees and expenses of counsel shall be at the expense of the Company; and

(c) The Company will not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of

any action or claim effected without its prior written consent. The Company shall not settle any action or claim which would impose any Expense,

Liability, limitation, obligation or penalty on Indemnitee without Indemnitee’s prior written consent. Neither the Company nor Indemnitee shall

unreasonably withhold its or Indemnitee’s respective consent to any proposed settlement.

11.2 Contribution. To the extent the indemnification provided for under any provision of this Agreement is determined (in the manner

hereinabove provided) not to be permitted under applicable law, then in the event Indemnitee was, is, or becomes a party to or witness or other participant in,

or is threatened to be made a party to or witness or other participant in, a Proceeding by reason of (or arising in part out of) Indemnitee’s status as an Agent of

the Company, the Company, in lieu of indemnifying Indemnitee, and in the absence of personal enrichment, acts of intentional fraud or dishonesty or criminal

conduct on the part of the Indemnitee, shall contribute to the amount of any and all Expenses, judgments, fines, or penalties assessed against or incurred or

paid by Indemnitee on account of such Proceeding and any and all amounts paid in settlement of that Proceeding (including all interest, assessments, and other

charges paid or payable in connection with or in respect of such Expenses, judgments, fines, penalties, or amounts paid in settlement) for which such

indemnification is not permitted (“Contribution Amounts”), in such proportion as is appropriate to reflect the relative fault with respect to the subject matter of

the Proceeding giving rise to the Contribution Amounts of Indemnitee, on the one hand, and of the Company and any and all other parties (including officers

and directors of the Company other than Indemnitee) who may be at fault with respect to

9

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
such matter (collectively, including the Company, the “Third Parties”) on the other hand. The relative fault of the Third Parties and Indemnitee shall be

determined (i) by reference to the relative fault of Indemnitee as determined by the court or other governmental agency assessing the Contribution Amounts or

(ii) to the extent such court or other governmental agency does not apportion relative fault, by the Independent Counsel (or such other party which makes a

determination under Section 5) after giving effect to, among other things, the relative intent, knowledge, access to information, and opportunity to prevent or

correct the subject matter of the Proceedings and other relevant equitable considerations of each party. The Company and Indemnitee agree that it would not be

just and equitable if contribution pursuant to this paragraph 11.2 were determined by pro rata allocation or by any other method of allocation which does not

take into account the equitable considerations referred to in this paragraph 11.2.

12. Miscellaneous Provisions.

12.1 Severability; Partial Indemnity. If any provision or provisions of this Agreement (or any portion thereof) shall be held by a court

of competent jurisdiction to be invalid, illegal or unenforceable for any reason whatsoever: (a) such provision shall be limited or modified in its application to

the minimum extent necessary to avoid the invalidity, illegality or unenforceability of such provision; (b) the validity, legality and enforceability of the

remaining provisions of this Agreement shall not in any way be affected or impaired thereby; and (c) to the fullest extent possible, the provisions of this

Agreement shall be construed so as to give effect to the intent manifested by the provision (or portion thereof) held invalid, illegal or unenforceable. If

Indemnitee is not wholly successful in any Proceeding or in the defense of any claim, issue or matter therein, but is successful on the merits or otherwise as to

one or more but less than all claims, issues, or matters, the Company shall indemnify Indemnitee against all Expenses incurred by or on behalf of such

Indemnitee in connection with each successfully resolved claim, issue or matter. For purposes of this paragraph 12.1, the term “successful on the merits or

otherwise” shall include, but not be limited to, (i) any termination, withdrawal or dismissal (with or without prejudice) of any action against Indemnitee

without any express finding of liability or guilt against Indemnitee, or (ii) the settlement of any action, pursuant to which Indemnitee pays less than $10,000.

12.2 Identical Counterparts. This Agreement may be executed in one or more counterparts, each of which shall for all purposes be

deemed to be an original but all of which together shall constitute one and the same Agreement. Only one such counterpart, signed by the party against whom

enforceability is sought, needs to be produced to evidence the existence of this Agreement.

12.3 Interpretation of Agreement. It is understood that the parties hereto intend this Agreement to be interpreted and enforced so as to

provide indemnification to Indemnitee to the fullest extent not now or hereafter prohibited by law.

12.4 Headings. The headings of the Sections and paragraphs of this Agreement are inserted for convenience only and shall not be

deemed to constitute part of this Agreement or to affect the construction thereof.

10

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
12.5 Modification and Waiver. No supplement, modification or amendment of this Agreement shall be binding unless executed in

writing by both of the parties to this Agreement. No waiver of any provision of this Agreement shall be deemed to constitute a waiver of any other provisions

hereof (whether or not similar) nor shall such waiver constitute a continuing waiver. No waiver of any provision of this Agreement shall be effective unless

executed in writing.

12.6 Notices. All notices, requests, demands and other communications hereunder shall be in writing and shall be deemed to have

been duly given when (a) delivered in person (by express courier or otherwise) and receipted for by the party to whom said notice or other communication shall

have been directed; (b) received by telegraphic or other electronic means (including facsimile, telecopy, telex and e-mail) with confirmation of transmission by

the transmitting equipment or (c) mailed by certified or registered mail with postage prepaid, on the third business day after the date on which it is so mailed,

as follows:

If to Indemnitee: 

 

If to the Company: Cimarex Energy Co.

1700 Lincoln Street, Suite 1800

Denver, CO 80203

Attn: General Counsel

or to such other address as may have been furnished to Indemnitee by the Company or to the Company by Indemnitee, as the case may be.

12.7 Governing Law, Venue and Consent to Jurisdiction. This Agreement and the legal relations among the parties shall be governed

by, and construed and enforced in accordance with, the laws of the State of Delaware, without regard to its conflict of laws rules. Subject to Indemnitee’s

rights under paragraph 7.1 and the final two sentences of this paragraph 12.7, the Company and Indemnitee hereby irrevocably and unconditionally (i) agree

that any action or proceeding arising out of or in connection with this Agreement shall be brought only in the Chancery Court of the State of Delaware (the

“Delaware Court”), and not in any other state or federal court in the United States of America or any court in any other country, (ii) consent to submit to the

exclusive jurisdiction of the Delaware Court for purposes of any action or proceeding arising out of or in connection with this Agreement, (iii) waive any

objection to the laying of venue of any such action or proceeding in the Delaware Court, and (iv) waive, and agree not to plead or to make, any claim that any

such action or proceeding brought in the Delaware Court has been brought in an improper or inconvenient forum. Notwithstanding the foregoing, Indemnitee

may, in Indemnitee’s sole discretion, elect to bring any action or proceeding arising out of or in connection with this Agreement in any federal or state court

located in the State of Colorado. If Indemnitee makes such election, the Company hereby irrevocably and unconditionally (i) consents to submit to the

exclusive jurisdiction of such state or federal court located in the State of Colorado (the “ Colorado Court”) for purposes of any action or proceeding arising out

of or in connection with this Agreement, (ii) waives any objection to the laying of venue of any such action or proceeding in such Colorado Court, and

11

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
(iii) waives, and agrees not to plead or to make, any claim that any such action or proceeding brought in such Colorado Court has been brought in an

improper or inconvenient forum.

12.8 Entire Agreement. This Agreement represents the entire agreement between the parties hereto, and there are no other agreements,

contracts or understanding between the parties hereto with respect to the subject matter of this Agreement, except as specifically referred to herein or as provided

in Sections 3 and 8 hereof.

[The remainder of this page has been left intentionally blank.]

12

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the day and year first above written.

COMPANY:

CIMAREX ENERGY CO.

By:

Name:

Title: Chief Executive Officer and President

INDEMNITEE:

Name:

[Signature Page to Indemnification Agreement]

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 21.1 

List of Significant Subsidiaries 

Cimarex Energy Co. of Colorado, a Texas corporation

Conmag Energy Corporation, a Texas corporation

Cimarex Gas Gathering, Inc., a Texas corporation

Hunter Resources, Inc., a Pennsylvania corporation

Inesco Corporation, a Texas corporation

Key Production Company, Inc., a Delaware corporation

Magnum Hunter Production, Inc., a Texas corporation

Oklahoma Gas Processing, Inc., a Delaware corporation

Prize Energy Resources, Inc., a Delaware corporation

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

EXHIBIT 21.1

List of Significant Subsidiaries

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 23.1 

Consent of Independent Registered Public Accounting Firm 

The Board of Directors

Cimarex Energy Co.:

 We consent to the incorporation by reference in the registration statement (No. 333-183939) on Form S-3 and registration statements (Nos. 333-

125621, 333-174361, and 333-100235) on Form S-8 of Cimarex Energy Co. of our reports dated February 26, 2013, with respect to the consolidated

balance sheets of Cimarex Energy Co. and subsidiaries as of December 31, 2012 and 2011, and the related consolidated statements of income and

comprehensive income, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2012, and the

effectiveness of internal control over financial reporting as of December 31, 2012, which reports appear in the December 31, 2012 annual report on

Form 10-K of Cimarex Energy Co.

KPMG LLP

Denver, Colorado

February 26, 2013

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

Exhibit 23.1

Consent of Independent Registered Public Accounting Firm

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 23.2 

Consent of DeGolyer and MacNaughton 

February 22, 2013

Cimarex Energy Co.

1700 Lincoln Street, Suite 1800

Denver, CO 80203-4518

Ladies and Gentlemen:

 We hereby consent to the reference to DeGolyer and MacNaughton and to the reference to the review of proved oil and gas reserves as of

December 31, 2012, estimated by Cimarex Energy Company (Cimarex) that were presented in our letter report dated January 25, 2013 (our Letter

Report), under the headings "Risk Factors," "Properties—Oil and Gas Reserves," and "Notes to the Consolidated Financial Statements—Unaudited

Supplemental Oil and Gas Disclosures, Oil and Gas Reserve Information" and to the filing as an exhibit of our Letter Report in the Annual Report on

Form 10-K of Cimarex for the fiscal year ended December 31, 2012.

 We further consent to the incorporation by reference of our Letter Report in the Registration Statements on Form S-3 (Nos. 333-162051, 333-

183939) and on Form S-8 (Nos. 333-125621, 333-174361, and 333-100235) of Cimarex Energy Co. (Registration Statements) and to the use of the

name DeGolyer and MacNaughton under the heading of "Experts" in the Registration statements.

Very truly yours,

/s/ DEGOLYER AND MACNAUGHTON

DeGOLYER and MacNAUGHTON

Texas Registered Engineering Firm F-716

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

EXHIBIT 23.2

Consent of DeGolyer and MacNaughton

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

EXHIBIT 24.1 

POWER OF ATTORNEY 

 KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below hereby constitutes and appoints Thomas E. Jorden

and Paul Korus and each of them acting alone, his true and lawful attorney-in-fact and agent, with full power of substitution and revocation, for him in

any and all capacities, to execute and cause to be filed with the Securities and Exchange Commission the Cimarex Energy Co. Annual Report on

Form 10-K for the fiscal year ended December 31, 2012, and any and all amendments thereto, with exhibits thereto, and any other documents in

connection therewith and hereby ratifies and confirms all that said attorney-in-fact or his substitute or substitutes may do or cause to be done by virtue

hereof.

 IN WITNESS WHEREOF, the undersigned have subscribed these presents as of the 25 th day of February 2013.

/s/ THOMAS E. JORDEN

Thomas E. Jorden, Director, President and Chief

Executive Officer

/s/ JOSEPH R. ALBI

Joseph R. Albi, Director, Executive Vice President and

Chief Operating Officer

/s/ PAUL KORUS

Paul Korus, Senior Vice President and Chief Financial

Officer

/s/ JERRY BOX

Jerry Box, Director

/s/ HANS HELMERICH

Hans Helmerich, Director

/s/ DAVID A. HENTSCHEL

David A. Hentschel, Director

/s/ HAROLD R. LOGAN, JR.

Harold R. Logan, Jr., Director

/s/ FLOYD R. PRICE

Floyd R. Price, Director

/s/ MONROE W. ROBERTSON

Monroe W. Robertson, Director

/s/ MICHAEL J. SULLIVAN

Michael J. Sullivan, Director

/s/ L. PAUL TEAGUE

L. Paul Teague, Director

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

EXHIBIT 24.1

POWER OF ATTORNEY

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.1 

I, Thomas E. Jorden, certify that:

1) I have reviewed this annual report on Form 10-K 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.

Date: February 26, 2013

/s/ THOMAS E. JORDEN

Name: Thomas E. Jorden

Title: Chairman, President & Chief Executive Officer

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

Exhibit 31.1

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

Exhibit 31.2 

I, Paul Korus, certify that:

1) I have reviewed this annual report on Form 10-K 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.

Date: February 26, 2013

/s/ PAUL KORUS

Name: Paul Korus

Title: Senior Vice President and Chief Financial Officer

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

Exhibit 31.2

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

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 Annual Report on Form 10-K for the period ended December 31, 2012 (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.

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

Dated: February 26, 2013 /s/ THOMAS E. JORDEN

Name: Thomas E. Jorden

Title: Chairman, President & Chief Executive Officer

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

Exhibit 32.1

Certification

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks -- Click here to rapidly navigate through this document

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 Annual Report on Form 10-K for the period ended December 31, 2012 (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.

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

Dated: February 26, 2013 /s/ PAUL KORUS

Name: Paul Korus

Title: Senior Vice President and Chief Financial

Officer

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
QuickLinks

Exhibit 32.2

Certification

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Exhibit 99.1

DEGOLYER AND

MACNAUGHTON 500 I

SPRING VALLEY ROAD

SUITE 800 EAST

DALLAS, TEXAS 75244

January 25, 2013

Cimarex Energy

Company 1700

Lincoln Street

Suite 1800 Denver,

Colorado 80203

Gentlemen:

Pursuant to

your request, we

have conducted a

reserves audit of

the net proved

crude oil,

condensate,

natural gas

liquids (NGL), and

natural gas

reserves, as of

December 31, 2012,

of certain

properties owned

by Cimarex Energy

Company

(Cimarex). This

evaluation was

completed on

January 25, 2013.

Cimarex has

represented that

these properties

account for greater than 80

percent of the total

future net

revenue

discounted at 10

percent

attributable to

the total interests

owned by Cimarex,

as well as greater

than 75 percent on a

net equivalent

barrel basis of

Cimarex’s net

proved reserves as

of December 31,

2012, and that the net

proved reserves estimates have been

prepared in

accordance with the

reserves

definitions of

Rules 4—10(a) (1)

—(32) of

Regulation S—X of

the Securities and

Exchange

Commission (SEC)

of the United States.

We have reviewed

information

provided to us by

Cimarex that it

represents to be

Cimarex’s

estimates of the net

reserves, as of

December 31, 2012,

for the same

properties as

those which we

evaluated. This

report was

prepared in

accordance with

guidelines

specified in Item

1202(a)(8) of

Regulation S-K

and is to be used in

certain SEC filings

by Cimarex.

Reserves included

herein are

expressed as net

reserves as

represented by

Cimarex. Gross

reserves are defined

as the total

estimated

petroleum to be

produced from

these properties

after December 31,

2012. Net reserves

are defined as that

portion of the gross

reserves

attributable to

the interests owned

by Cimarex after

deducting all

interests owned by

others. Estimates

of oil, condensate,

NGL, and natural

gas should be

regarded only as

estimates that may

change as further

production

history and

additional

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
2 DEGOLYER AND

MACNAUGHTON

information

become available.

Not only are such

reserves estimates

based on that

information which

is currently

available, but

such estimates

are also subject to

the uncertainties

inherent in the

application o f

judgmental

factors in

interpreting

such

information. Data

used in this

audit were

obtained from

reviews with

Cimarex

personnel,

Cimarex files,

from records on file

with the

appropriate

regulatory

agencies, and from

public

sources. In the

preparation of

this report we have

relied, without

independent

verification,

upon such

information

furnished by

Cimarex with

respect to

property

interests,

production from

such

properties,

current costs o f

operation and

development,

current prices

for production,

agreements

relating to

current and

future

operations and sale

of production,

and various other information and

data that were

accepted as

represented. A

field examination

of the properties

was not considered

necessary for the

purposes of this

report.

Methodology and

Procedures

Estimates o f

reserves were

prepared by the

use of

appropriate

geologic,

petroleum

engineering, and

evaluation

principals and

techniques that

are in accordance

with practices

generally

recognized by the

petroleum

industry as

presented in the

publication of

the Society of

Petroleum

Engineers entitled

“Standards

Pertaining to the

Estimating and

Auditing of Oil and

Gas Reserves

Information

(Revision as of

February 19, 2007).”

The method or

combination of

methods used in

the analysis of each

reservoir was

tempered by

experience with

similar

reservoirs, stage of

development,

quality and

completeness of

basic data, and

production

history. When

applicable, the

volumetric

method was used to

estimate the

original oil in

place (OOIP) and

the original gas in

place (OGIP).

Structure and

isopach maps were

constructed to

estimate reservoir

volume.

Electrical logs,

radioactivity logs,

core analyses, and

other available data

were used to

prepare these

maps as well as to

estimate

representative

values for

porosity and water

saturation. When

adequate data were available and when

circumstances

justified,

material balance

and other

engineering

methods were used

to estimate OOIP or

OGIP. Estimates

of ultimate

recovery were

obtained after

applying recovery

factors to OOIP or

OGIP. These

recovery factors

were based on

consideration of the

type of energy

inherent in the

reservoirs,

analyses of the

petroleum, the

structural

positions

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
3 DEGOLYER AND

MACNAUGHTON of the

properties, and

the production

histories. When

applicable,

material balance

and other

engineering

methods were used

to estimate

recovery factors. An

analysis of

reservoir

performance,

including

production rate,

reservoir

pressure, and

gas-oil ratio

behavior, was used

in the estimation of

reserves. For

depletion-type

reservoirs or those

whose performance

disclosed a reliable

decline in

producing-rate

trends or other

diagnostic

characteristics,

reserves were

estimated by the

application of

appropriate

decline curves or

other performance

relationships. In

the analyses of

productiondecline curves,

reserves were

estimated only to

the limits of

economic

production or to

the limit of the

production

licenses as

appropriate.

Definition of

Reserves

Petroleum

reserves estimated

by Cimarex

included in this

report are

classified as

proved. Only

proved reserves

have been

evaluated for this

report. Reserves

classifications

used by Cimarex

in this report are in

accordance with the

reserves

definitions of

Rules 4-10(a) (1)

—(32) of

Regulation S—X of

the SEC. Reserves

are judged to be

economically

producible in

future years

from known

reservoirs under

existing economic

and operating

conditions and

assuming

continuation of

current

regulatory

practices using

conventional

production

methods and

equipment. In

the analyses of

productiondecline curves,

reserves were

estimated only to

the limit of

economic rates of

production

under existing

economic and

operating

conditions using

prices and costs

consistent with the

effective date of

this report,

including

consideration of

changes in existing

prices provided

only by

contractual

arrangements but

not including

escalations based

upon future

conditions. The

petroleum

reserves are

classified as

follows: Proved oil

and gas reserves —

Proved oil and gas

reserves are those

quantities of oil

and gas, which, by

analysis of

geoscience and

engineering data,

can be estimated

with reasonable

certainty to be

economically

producible

—from a given date

forward, from

known reservoirs,

and under

existing economic

conditions,

operating

methods, and

government

regulations

—prior to the time

at which contracts

providing the right

to operate

expire, unless

evidence indicates

that renewal is

reasonably certain,

regardless of

whether

deterministic or

probabilistic

methods are used

for the estimation.

The project to

extract the

hydrocarbons

must have

commenced or the

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
4 DEGOLYER AND

MACNAUGHTON

operator must be

reasonably certain

that it will

commence the

project within a

reasonable time. (i)

The area of the

reservoir considered

as proved

includes: (A) The

area identified by

drilling and limited

by fluid contacts,

if any, and

(B) Adjacent

undrilled

portions of the

reservoir that can,

with reasonable

certainty, be

judged to be

continuous with

it and to contain

economically

producible oil or

gas on the basis of

available geoscience

and engineering data.

(ii) In the absence of

data on fluid

contacts, proved

quantities in a

reservoir are

limited by the lowest

known hydrocarbons

(LKH) as seen in a well

penetration

unless geoscience,

engineering, or

performance data

and reliable

technology

establishes a lower

contact with

reasonable

certainty. (iii)

Where direct

observation from

well penetrations

has defined a highest

known oil (HKO)

elevation and the

potential exists

for an associated gas

cap, proved oil

reserves may be

assigned in the

structurally

higher portions of

the reservoir only if

geoscience,

engineering, or

performance data

and reliable

technology establish

the higher contact

with reasonable

certainty. (iv)

Reserves which can be

produced

economically

through

application of

improved recovery

techniques

(including, but

not limited to,

fluid injection)

are included in the

proved

classification when:

(A) Successful

testing by a pilot

project in an area of

the reservoir with

properties no more

favorable than in the

reservoir as a whole,

the operation of an

installed program

in the reservoir or an analogous

reservoir, or other

evidence using

reliable technology

establishes the

reasonable certainty

of the engineering

analysis on which the

project or program

was based; and (B) The

project has been

approved for

development by all

necessary parties

and entities,

including

governmental

entities.

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
5 DEGOLYER AND

MACNAUGHTON

(v) Existing

economic conditions

include prices and

costs at which

economic

producibility

from a reservoir is to

be determined. The

price shall be the

average price

during the 12-month

period prior to the

ending date of the

period covered by the

report, determined

as an unweighted

arithmetic average of

the first-day-of-themonth price for each

month within such

period, unless

prices are defined by

contractual

arrangements,

excluding

escalations based

upon future

conditions.

Developed oil and gas

reserves — Developed

oil and gas reserves are

reserves of any

category that can be

expected to be

recovered: (i)

Through existing

wells with existing

equipment and

operating methods or

in which the cost of the

required

equipment is

relatively minor

compared to the cost

of a new well; and (ii)

Through installed

extraction

equipment and

infrastructure

operational at the

time of the reserves

estimate if the

extraction is by

means not involving a

well. Undeveloped oil

and gas reserves —

Undeveloped oil and

gas reserves are

reserves of any

category that are

expected to be

recovered from new

wells on undrilled

acreage, or from

existing wells where a

relatively major

expenditure is

required for

recompletion. (i)

Reserves on

undrilled acreage

shall be limited to

those directly

offsetting

development

spacing areas that are

reasonably certain of

production when

drilled, unless

evidence using

reliable technology

exists that

establishes

reasonable certainty

of economic

producibility at

greater distances.

(ii) Undrilled

locations can be

classified as having

undeveloped

reserves only if a

development plan

has been adopted

indicating that they

are scheduled to be

drilled within five

years, unless the

specific

circumstances

justify a longer

time. (iii) Under no

circumstances

shall estimates for

undeveloped

reserves be

attributable to any

acreage for which an

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
6 DEGOLYER AND

MACNAUGHTON

application of

fluid injection or

other improved

recovery

technique is

contemplated,

unless such

techniques have

been proved

effective b y actual projects

in the same

reservoir or an

analogous

reservoir, as

defined in [section

210.4-10

(a) Definitions], or

by other evidence

using reliable

technology

establishing

reasonable

certainty.

Primary

Economic

Assumptions The

following economic

assumptions

were used for

estimating

existing and

future prices

and costs: Oil and

Condensate Prices

Cimarex has

represented that

the oil and

condensate prices

were based on a

reference price,

calculated as the

unweighted

arithmetic average

of the first-day-ofthe-month price

for each month

within the 12-month

period prior to the end of the reporting

period, unless

prices are defined

by contractual

arrangements.

Cimarex applied

differentials by

property to a West

Texas

Intermediate

reference price of

$94.71 per barrel and

the prices were held

constant

thereafter. The

volume- weighted

average price over

the life of the

properties for

only those

properties

reviewed by DeGolyer

and MacNaughton

was $88.89 per

barrel. Natural

Gas Prices Cimarex has

represented that

the natural gas

prices were based o n a reference price,

calculated as the

unweighted

arithmetic average

of the first-day-of- the-month price

for each month

within the 12-month

period prior to the

end of the reporting

period, unless

prices are defined

by contractual

arrangements.

Cimarex applied

differentials by

property to a Henry

Hub reference

price of $2.76 per

MMBtu furnished

by Cimarex and held

constant

thereafter. The

volume-weighted

average price over

the life of the

properties for

only those

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
7 [LOGO] DEGOLYER

AND MACNAUGHTON

properties

reviewed by DeGolyer

and MacNaughton

was $2.17 per Mcf. NGL

Prices Cimarex

has calculated NGL

prices for the

appropriate

properties

receiving NGL by

applying

differentials to a

reference price of

$36.60 per barrel.

The prices were held constant

thereafter. The

volume-weighted

average price over

the life of the

properties for

only those

properties

reviewed by DeGolyer

and MacNaughton

was $29.09 per

barrel. Operating

Expenses and

Capital Costs

Operating

expenses and

capital costs,

based on existing economic

conditions and

provided by

Cimarex, were

used in

estimating

future costs

required to

operate the

properties. In

certain cases,

future

expenses, either

higher or lower than

existing

expenses, may

have been used

because of

anticipated

changes in

operating

conditions. These

expenses and costs

were not escalated

for inflation. While

the oil and gas

industry may be

subject to

regulatory

changes from time

to time that could

affect an industry

participant’s

ability to recover

its oil and gas

reserves, we are not

aware of any such

governmental

actions which

would restrict the

recovery of the

December 31, 2012,

estimated oil and

gas volumes. The

reserves estimated

in this report can be

produced under

current

regulatory

guidelines.

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
8 [LOGO] DEGOLYER

AND MACNAUGHTON

Cimarex has

represented that

estimated net

proved reserves

attributable to

the reviewed

properties are

based on the

definitions o f

proved reserves of

the SEC. Cimarex

represents that its

estimates of the net

proved reserves

attributable to

these properties,

which represent

greater than 75

percent of

Cimarex’s reserves

on a net equivalent

basis and greater

than 80 percent of

the total future

net revenue

discounted at 10

percent

attributable to

the interests owned

by Cimarex, are as

follows,

expressed in

thousands of

barrels (Mbbl),

millions of cubic

feet (MMcf), and

thousands of

barrels of oil

equivalent

(Mboe): Cimarex’s

Estimated Net

Proved Reserves as

of December 31, 2012

Oil and Condensate

(Mbbl) NGL (Mbbl)

Natural Gas (MMcf)

Oil Equivalent

(Mboe) Reviewed by

DeGolyer and

MacNaughton

66,698 78,337 916,804

297,835 Not Reviewed

by DeGolyer and

MacNaughton

11,223 11,572 335,059

78,639 Total Proved

Reserves 77,921 89,909

1,251,863 376,474

Notes: 1. All

reserves estimates

shown were

prepared by

Cimarex. 2. Gas is

converted to oil

equivalent

using a factor of

6,000 cubic feet of

gas per 1 barrel of

oil equivalent. In

our opinion, the

information

relating to

estimated proved

reserves of oil,

condensate,

natural gas

liquids, and

natural gas

estimated by us contained in this

report has been

prepared in

accordance with

Paragraphs 932-

235-50-4, 932-235-

50-6, 932-235-50-7,

and 932-235-50-9 of

the Accounting Standards Update

932-235-50,

Extractive

Industries – Oil

and Gas (Topic 932):

Oil and Gas Reserve

Estimation and

Disclosures

(January 2010) of

the Financial

Accounting

Standards Board and

Rules 4–10(a) (1)

–(32) of

Regulation S–X and

Rules 302(b),

1201, and

1202(a) (1), (2),

(3), (4), (8) of

Regulation S–K of

the Securities and

Exchange

Commission;

provided, however,

that estimates of

proved developed

and proved

undeveloped

reserves are not

presented at the

beginning of the

year. To the extent

the above- enumerated

rules,

regulations, and

statements

require

determinations of

an accounting or

legal nature, we,

as engineers, are

necessarily

unable to

express an

opinion as to

whether the abovedescribed

information is in

accordance

therewith or

sufficient

therefor. In

comparing the

detailed net proved

reserves estimates

prepared by us

and by Cimarex, we

have found

differences, both

positive and

negative

resulting in an

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
9 [LOGO] DEGOLYER

AND MACNAUGHTON

aggregate

difference of less

than 10 percent when

compared on the

basis of net

equivalent

barrels. It is our

opinion that the net

proved reserves

estimates

prepared by

Cimarex on the

properties

reviewed by us and

referred to above,

when compared on

the basis of net

equivalent

barrels, in

aggregate, are

reasonable.

DeGolyer and

MacNaughton is an

independent

petroleum

engineering

consulting firm

that has been

providing

petroleum

consulting

services

throughout the

world since 1936.

DeGolyer and

MacNaughton does

not have any

financial interest,

including stock

ownership, i n

Cimarex. Our

fees were not

contingent on the

results of our

evaluation. This letter report has

been prepared at

the request of

Cimarex. DeGolyer

and MacNaughton

has used all

assumptions,

data,

procedures, and

methods that it

considers necessary

and appropriate

to prepare this

report.

Submitted,

DeGOLYER and

MacNAUGHTON Texas

Registered

Engineering Firm

F-716 Paul J.

Szatkowski,

P.E. Senior Vice

President DeGolyer

and MacNaughton

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
[LOGO] DEGOLYER

AND MACNAUGHTON

CERTIFICATE of

QUALIFICATION I,

Paul J.

Szatkowski,

Petroleum

Engineer with

DeGolyer and

MacNaughton, 5001

Spring Valley Road,

Suite 800 East,

Dallas, Texas, 75244

U.S.A., hereby

certify: 1. That I am

a Senior Vice

President with

DeGolyer and

MacNaughton,

which company did

prepare the letter

report addressed to

Cimarex dated

January 25, 2013,

and that I, as Senior

Vice President, was responsible for the

preparation of

this report. That I

attended Texas A&M

University, and that

I graduated with a

Bachelor of Science degree in

Petroleum

Engineering in the

year 1974; that I am a

Registered

Professional

Engineer in the

State of Texas; that

I am a member of the

International

Society of

Petroleum

Engineers and the

American

Association o f

Petroleum

Geologists; and that

I have in excess of 38

years of

experience in oil

and gas reservoir

studies and

reserves

evaluations.

Paul J.

Szatkowski,

P.E. Senior Vice

President DeGolyer

and MacNaughton

Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.
Source: CIMAREX ENERGY CO, 10-K, February 26, 2013 Powered by Morningstar®

 Document ResearchSM

The information contained herein may not be copied, adapted or distributed and is not warranted to be accurate, complete or timely. The user assumes all risks for any damages or losses arising from any use of this

information, except to the extent such damages or losses cannot be limited or excluded by applicable law. Past financial performance is no guarantee of future results.