The pursuit of more efficient drilling and the use of longer laterals continued to be the name of the game for Cimarex Energy Co. during the third quarter, as it cut from 16 to 12 the number of rigs it plans to deploy in the Permian Basin and the Midcontinent next year. But the company blew past its production guidance, and impairments on the value of its oil and gas portfolio trimmed quarterly earnings by more than $750 million.

On Wednesday, the Denver-based company said total production increased 3.9% between 3Q2014 and 3Q2015, from 942.4 MMcfe/d to 978.9 MMcfe/d, and the company beat its production guidance of 920-940 MMcfe/d. Natural gas and natural gas liquids (NGL) production was essentially flat between the two quarters — at 464.3 MMcf/d and 35,815 b/d, respectively — but oil production surged 15.2%, from 43,376 to 49,951 b/d. Most of the new oil production came from the Permian, rising from 34,299 to 42,367 b/d, a 23.6% increase.

Cimarex issued production guidance of 980-1,010 MMcfe/d for 4Q2015, and also bumped up its production guidance for full year-2015 from an estimated 960-980 MMcfe/d last August to 983-991 MMcfe/d. But the company slashed its capital expenditures estimate from $1 billion forecast last August to $900-950 million.

During the third quarter, Cimarex spent $184 million on exploration and development and completed 56 gross (14 net) wells. Of those four net wells, all were in the Wolfcamp Shale of the Permian, while the remaining 52 gross (10 net) were completed in the Midcontinent.

Longer lateral wells continued to generate excitement. In the Permian, Cimarex currently has 13 wells with 10,000-foot laterals targeting the Wolfcamp D entered into production; they had an average 30-day initial production (IP) peak rate of 2,308 boe/d, 46% weighted toward gas.

In the Midcontinent, Cimarex completed its first 10,000-foot lateral well in the Meramec formation. Average 30-day IP peak production at the Clayton 1HX well was 16.0 MMcfe/d, with 57% gas. The company also has 11 wells with 5,000-foot laterals targeting the Meramec and in production, averaging a 30-day IP peak of 9.3 MMcfe/d, 47% gas.

Cimarex is currently operating seven rigs, but it is about to add an eighth and plans to have 12 deployed by the end of the year and into early 2016. Of those, six are to be deployed in the Permian, with two targeting the Bone Spring formation, three in Culberson County, TX, and one in neighboring Reeves County, TX. The remaining six rigs would be deployed in the Midcontinent, with four targeting the Woodford Shale and two the Meramec formation.

Still, the drilling program for 2016 is smaller than the one envisioned in August, when it proposed running 16 rigs.

“When we look at our program now with 12 rigs, we come pretty close to spending the amount of capital that we envisioned spending in 2016 when we originally looked at running 16 rigs,” Vice President for Exploration John Lambuth said during the conference call. “We are really drilling these wells fast. It just means we can get more done with fewer rigs. We’re still looking at a certain capital model, but we’re just more efficient with it.”

Lambuth said Cimarex plans to spud its first Wolfcamp A downspacing pilot program by the end of the year in Culberson County. Locations are being built for a six-well pilot program using 7,500-foot laterals and two different spacing designs. In the Wolfcamp D, five 10,000-foot laterals are expected to be drilled during 1Q2016, with production expected in mid-2016.

In the Midcontinent, Lambuth said the company was nearly finished with an infill development program, which includes 57 gross wells, in the Cana-Woodford Shale that it began in late 2014. He added that the company will then shift to another infill program, consisting of 50 gross (23 net) wells, on the east side of its core acreage. Production there is expected by July.

Cimarex reported a net loss of $763.3 million (minus $8.21/share) for 3Q2015, compared with net income of $144.3 million ($1.65) in 3Q2014. The adjusted net loss for the quarter was $14.4 million (minus 15 cents/share), compared with year-ago profits of $134.2 million ($1.65) in 3Q2014. The company attributed the loss to ongoing low commodity prices, with impairment from oil and gas properties totaling $750.2 million.