Filed by Helmerich & Payne, Inc.
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Cimarex Energy Co.
Commission File No.:132-02238
Slide 1
The information contained within this presentation is forward looking and involves risks and uncertainties that could significantly impact expected results. A discussion of these risks and uncertainties is contained in the Company's Form 10-Q filed with the Securities and Exchange Commission on May 15, 2002.
Slide 2
FORWARD-LOOKING STATEMENTS
It should be noted that this announcement contains certain statements that
may be deemed to be "forward-looking" statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of
the Securities Exchange Act of 1934, as amended. Such forward-looking
statements include, without limitation, statements regarding the
consummation of the proposed spin-off and merger, its effect on future
earnings, cash flow or other operating results, the expected closing date
of the proposed spin-off and merger, any other effect or benefit of the
proposed spin-off and merger, the tax treatment of the proposed spin-off
and merger and the combined company, market prospects, and any other
statements that are not historical facts. H&P and Key strongly encourage
readers to note that some or all of the assumptions upon which such
forward-looking statements are based are beyond their ability to control or
estimate precisely, and may in some cases be subject to rapid and material
changes. Such assumptions include but are not limited to costs and
difficulties related to the integration of the businesses, costs, delays
and other difficulties related to the proposed spin-off and merger, closing
conditions not being satisfied, general market conditions prevailing in the
exploration for and development and production of oil and gas (including
inflation or lack of availability of goods and services, environmental
risks, drilling risks and regulatory changes), operating hazards and
delays, actions by customers and other third parties, the future price of
oil and gas, and other factors detailed in H&P's and Key's filings with the
Securities and Exchange Commission (the "SEC"), which are available free of
charge on the SEC's website at www.sec.gov. Should one or more of these
risks or uncertainties materialize, or should underlying assumptions prove
incorrect, actual results may vary materially from those indicated. H&P and
Key undertake no obligation to publicly update any forward-looking
statements, whether as a result of new information, future events or
otherwise.
Slide 3
ADDITIONAL INFORMATION
In connection with the proposed spin-off and merger, Key and Cimarex filed
with the SEC on May 9, 2002, a Registration Statement No. 333-87948 on Form
S-4. Investors and security holders are urged to carefully read the
Registration Statement regarding the proposed transaction because it
contains important information. Investors and security holders may obtain a
free copy of the Registration Statement and other documents containing
information about Key and H&P's oil and gas division, without charge, at
the SEC's web site at www.sec.gov. Copies of the Registration Statement and
the SEC filings incorporated by reference therein may also be obtained for
free by directing a request to either: Key Production Company, Inc., 707
Seventeenth Street, Suite 3300, Denver, Colorado 80202, Attention: Sharon
M. Pope, Assistant Corporate Secretary; telephone 303-295-3995, fax:
303-295-3494, or Helmerich & Payne, Inc, Utica at Twenty-First Street,
Tulsa, Oklahoma 74114, Attention: Steven R. Mackey, Corporate Secretary;
telephone 918-742-5531, fax 918-743-2671.
Slide 4
PARTICIPANTS IN SOLICITATION
H&P, Cimarex, Key and their respective directors and executive officers may be deemed to be participants in the solicitation of proxies from Key's shareholders in connection with the proposed merger. Information concerning Key's participants in the solicitation is set forth in Key's proxy statement dated April 26, 2001, which is filed with the SEC. Hans Helmerich, Douglas E. Fears and Steven R. Mackey are currently directors of Cimarex, and each of them and Steven R. Shaw are currently officers of Cimarex (the "Cimarex Participants"). None of the Cimarex Participants beneficially owns any shares of Cimarex common stock. The Cimarex Participants are all executive officers of H&P. Information concerning H&P's participants in the solicitation is set forth in H&P's proxy statement dated January 25, 2002, which is filed with the SEC. Key's shareholders may obtain additional information about the interests of all such participants in the proposed merger by reading Registration Statement No. 333-87948 on Form S-4 which was filed with the SEC on May 9, 2002. Investors should read the Registration Statement carefully before making any voting or investment decisions.
Slide 5
A New Look For An 82 Year Old Company
>> H&P to Become a "Pure Play" Contract Drilling Company
Contract Drilling E&P Portfolio
HP 70 20 10
>> H&P's Total Rig Fleet to Increase by 33% from 2001 To 2003
1998 1999 2000 2001 2002E 2003E
East 90 90 88 96 113 128
[graphic omitted]
Slide 6
Helmerich & Payne, Inc.
(pre-transaction)
[graphic omitted]
Contract Drilling - 104 rigs
E&P - 245 Bcfe
Portfolio - $300MM
>> ~ $2.0 billion market cap
>> ~ 50 million shares outstanding
Slide 7
Exploration & Production Division Spun Off As Cimarex Energy Co.
[graphic omitted]
Exploration and Production division spun off to H&P Shareholders as Cimarex Energy Co.
Slide 8
Spin/Merge Goals
>> Use financial strength to enhance shareholder value
>> Increase focus and visibility
>> Strengthen E&P division's position
>> Capture tax efficiency
Slide 9 Why Key Production?
>> Impressive people and organization
>> Complementary and overlapping asset base
>> Strong balance sheet
>> Similar philosophies and cultures
Slide 10
Key Production Record Of Growth
($ in millions) 1992 2001
---- ----
Market Cap $25 $240
Debt $3 $34
Stock price ($/share) $3 $17
Reserves (Bcfe) 38 147
Reserves (Mcfe/share) 3.6 10.5
Production (Bcfe) 8.3 26.0
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Slide 11
Combined Properties
Helmerich & Payne, Inc.
Proved reserves (Bcfe) 245
% Natural gas 87%
Production (MMcfe/d) 116
Net undeveloped acres 150,401
Key Production Company
Proved reserves (Bcfe) 147
% Natural gas 62%
Production (MMcfe/d) 74
Net undeveloped acres 119,251
[graphic omitted]
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Slide 12
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Cimarex Energy
($ in millions) Key H&P Combined YE01 Proved reserves, Bcfe 147 245 392 2002E Production, MMcfe/d 74 116 190 % Gas Production 65% 90% 80% 2001 EBITDAX $80 $146 $226 Employees 95 150 245 |
Slide 13
What makes H&P attractive as a "pure play" contract drilling company?
>> Unique Strategy
>> Expanding Rig Fleet
>> Strong balance sheet
>> Additional analyst coverage and ownership interest
Slide 14
Helmerich & Payne, Inc.
Total Rigs
33% Increase
1998 1999 2000 2001 2002E 2003E
East 90 90 88 96 113 128
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[graphic omitted]
Slide 15
Rig Locations
[graphic omitted]
Slide 16
HELMERICH & PAYNE
INTERNATIONAL DRILLING CO.
FlexRig(TM)
[graphic omitted] The BEST VALUE rig
for a wide
range of wells
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Slide 17
The Market For FlexRig(TM)*
o The customer needs BEST VALUE from the contractor to achieve lowest
total well cost.
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o H&P believes BEST VALUE will come from investments in new rigs, innovative ideas and applications of new technologies - not from renovating the last used rig available.
Slide 18
The FlexRig's 8 - 18,000' Capacity
is Aimed at a Market Need
U.S. Rigs Drilling 1982-2001*
[graphic omitted]
0-10,000' 10,001-15,000' 15,001-17,500' 17,501-20,000' >20,000'
1983 62% 29% 5% 3% 1%4
2001 44% 43% 7% 4% 2%
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Slide 19
FlexRig Offers Continuity Over 8 - 18,000' well depths
Wells drilled by R166 (FlexRig1) for Chevron May '98 - Nov '01
8-9,000' 9-11,000' 11-14,000' 14-18,000'
9 28 8 4
[graphic omitted]
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Slide 20
FlexRig Offers Continuity Over 8 - 18,000' well depths
Wells drilled by R168 (FlexRig1) for Shell Nov '99 - April '02 (Continuing)
8-9,000' 9-11,000' 11-14,000' 14-18,000'
5 1 10 7
[graphic omitted]
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Slide 21
H&P Goals
For Improving Value
o Reduce safety and environmental incidents.
o Improve productivity
o Build the right rig at the best value cost
Slide 22
Reduce Safety &
Environmental Incidents
o Use "safety by design" to minimize or eliminate incidents.
o Develop new ideas such as patented round mud tanks to reduce incidents.
o Since 1998, mobile and FlexRigs have a Total Recordable Incident Rate (TRIR) 28% lower than H&P conventional rigs.
5 - Year Average TRIR (1998-1Q02)
[graphic omitted]
Slide 23
IMPROVE PRODUCTIVITY
o Reduce crew turnover.
o Mobile and FlexRig rig turnover rate is 73% lower than H&P conventional rigs.
H&P Crew Turnover - Mobile and FlexRigs* vs. Conventional Rigs 15 Months Jan. '01 - Mar. '02
[graphic omitted]
Slide 24
Capture & Use
Organizational Learnings
[graphic omitted]
graphic shows:
Maintenance
Safety
Environment
Communications
Training
Supply Chain Management
Slide 25
Apply New Ideas & Technology
[Graphic omitted]
graphic shows:
V-ICIS eD Controls
Round Mud Tanks
Integrated Top Drive
P-Quip System
VFD AC Drainworks
BoP Handling
Slide 26
Reduce Well Cycle Time
South Texas move times - 1500 HP Rigs
Average days per 40 mile move:
FlexRigs (257 moves) - 2.4 days
Conventional (49 moves) - 6.7 days
[graphic omitted]
Slide 27
Reduce Total Well Cost
[graphic omitted]
Slide 28
Build The Right Rig
At The Best Value Cost
o 1997 industry estimate*: $12.45MM for new 2000HP land rig w/o top drive. Related estimate: $11MM for new 1500HP land rig w/o top drive.
o H&P created value in FlexRig: Lower investment and enhanced
capabilities
Year Rig # Rigs New Cost ($MM) Top Drive
---- -------- ------ -------------- ---------
1998 FlexRig1 6 6.7A No
2001 FlexRig2 12 8.0A No
2002-3 FlexRig3 25 10.5E Yes
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* Source: Oil & Gas Journal, 22 September 1997
Slide 29
Reliability of New Technology
[graphic omitted]
o Support from H&P field operations
o Learning curve
o Varco - H&P collaboration
o Varco command center using H&P WAN
o Daily conference call to share organizational learnings
o Software and hardware upgrades
o "No Retreat" attitude
Slide 30
Rig Status as of 20 May 2002
Rigs Working /
Available Contracted
--------- ----------
U.S. Land, Mobile & FlexRigs(tm) 30 100%
U.S. Land, Conventional 29 72%
U.S. Platform 12 75%
International Land 33 55%
--- ---
Total 104 75%
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Slide 31
Total H&P Rigs Available
1998 1999 2000 2001 2002E 2003E
Offshore Rigs 11 10 10 10 12 12
Conventional Land Rigs 63 62 61 61 62 62
Mobile & FlexRigs 16 17 17 25 39 54
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[graphic omitted]
Slide 32
EBITDA ($MM)
1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002E 2003E
EBITDA 32.889 46.48 52.745 53.762 85.461 114.086 142.1 127.3 118.9 180.8 140
Peak Run Rate 371
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[graphic omitted]