Oil and Gas 360


OKLAHOMA CITYNov. 3, 2021 /PRNewswire/ —

• $369.3 MM Net Income; $1.01 per Diluted Share ($437.2 MM Adjusted Net Income; $1.20 per Adjusted Share (Non-GAAP)) in 3Q21

Continental Resources announces 3Q21 results; delivering record free cash flow & strategic expansion into permian basin- oil and gas 360

Source: Reuters

 $1.0 B Cash Flow from Operations & Company Record $669 MM Free Cash Flow (Non-GAAP) in 3Q21

• $3.9 B Projected Full-Year 2021 Cash Flow from Operations & $2.6 B Projected Full-Year 2021 Free Cash Flow (FCF) (Non-GAAP) at Current Strip Prices(~14% FCF Yield2 (Non-GAAP))

• Highly Accretive Expansion into Permian Basin; Immediately Additive to FCF Capacity
     o Adds up to 2% to Projected Return on Capital Employed(ROCE) on an Annual Basis4  
o Over 650 Gross Operated Locations in Third Bone Spring/Wolfcamp A & B; Over 1,000 Total Locations, Including Additional Zones Producing in the Basin
92 K Contiguous Net Leasehold Acres & 50 K Net Royalty Acres5; Extensive Owned Water Infrastructure
o PDPRepresents ~75% of Transaction Price; ~55 MBoepd (~70% Oil)

• Accelerating Commitment to Shareholder Capital & Corporate Returns
     o $0.05 Increase to Quarterly Dividend to $0.20 per Share; Approximately 1.6% Annualized Dividend Yield7
$65 MM Share Repurchases Executed; $618 MM Remaining under Previous Board Authorization
o 21% Projected ROCE in 2021

Continental Resources, Inc. (NYSE: CLR) (the “Company”) today announced its third quarter 2021 operating and financial results.

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The Company reported net income of $369.3 million, or $1.01 per diluted share, for the quarter ended September 30, 2021. In third quarter 2021, typically excluded items in aggregate represented $67.9 million, or $0.19 per diluted share, of Continental’s reported net income. Adjusted net income for third quarter 2021 was $437.2 million, or $1.20 per diluted share (non-GAAP). Net cash provided by operating activities for third quarter 2021 was $1.02 billion and EBITDAX was $1.12 billion (non-GAAP).

Adjusted net income (loss), adjusted net income (loss) per share, EBITDAX, free cash flow, free cash flow yield, net debt, net sales prices and cash general and administrative (G&A) expenses per barrel of oil equivalent (Boe) presented herein are non-GAAP financial measures. Definitions and explanations for how these measures relate to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures are provided at the conclusion of this press release.

The Company generated $1.02 billion of cash flow from operations and a Company record $669 million of free cash flow (non-GAAP) for the third quarter 2021. The Company now projects generating $3.9 billion of cash flow from operations and $2.6 billion of free cash flow (non-GAAP) for full-year 2021 at current strip prices, or approximately 14% free cash flow yield (non-GAAP).

Highly Accretive Expansion into Permian Basin; Immediately Additive to FCF Capacity

The Company announced today it has entered into a definitive agreement under which the Company will acquire select Permian Basin assets from Pioneer Natural Resources in an all-cash transaction valued at approximately $3.25 billion, subject to customary purchase price adjustments. The transaction has been unanimously approved by the Company’s Board of Directors, with an effective date of October 1, 2021 and an expected close in December 2021, subject to customary closing conditions.

“Continental’s foundation has always been built upon a strong geology-led corporate strategy. This continues today and has directly led us to our new strategic position in the Permian Basin. This acquisition will complement our existing deep inventory portfolio in the Bakken, Oklahoma and most recently, the Powder River Basin. In addition to the competitive geologic attributes, this transaction is accretive on key financial metrics and supports our long term target of 1.0x net debt to EBITDAX by year end 2022 at $60 WTI,” said Bill Berry, Chief Executive Officer.

Key Transaction Highlights

• Accretive to cash flow per share, earnings per share, cash margin and return on capital employed.
• Adds up to 2% to projected return on capital employed on an annual basis.
• Projected to generate $750 MM of annual cash flow from operations & $500 MM of annual free cash flow (non-GAAP) in 2022 at current prices.
• PDP represents ~75% of transaction price; ~55 MBoepd (~70% oil).
• 92 K contiguous net leasehold acres.
• 98% operated with over 90% of acreage held by production.
• 50 K net royalty acres and 31 K net surface acres.
• Extensive water infrastructure in place.
• Over 650 gross operated locations in Third Bone Spring/Wolfcamp A & B; over 1,000 total locations, including additional zones producing in the basin.
• Company projects 1.0x net debt (non-GAAP) to EBITDAX (non-GAAP) by YE22 ($60 WTI and gas strip prices)8.

“These Permian assets contain the key strategic components common to all of our assets with significant untapped potential to enhance performance through optimized density development, wellbore placement, operational efficiencies and further exploration,” said Jack Stark, President & Chief Operating Officer.

Citi Global Market, Inc. is serving as the Company’s financial advisor and White & Case LLP is serving as the Company’s legal advisor with respect to this transaction.

Accelerating Commitment to Shareholder Capital & Corporate Returns

The Company’s Board of Directors approved increasing the Company’s quarterly dividend to $0.20 per share, payable on November 26, 2021 to stockholders of record on November 15, 2021. This dividend represents a $0.05 increase to the Company’s $0.15 per share quarterly dividend paid in third quarter 2021 and equates to an approximately 1.6% annualized dividend yield. The Company also resumed transactions under its existing share repurchase program, with $65 million of share repurchases executed in third quarter 2021 and $618 million of share repurchase capacity remaining under the previous Board of Directors authorization. Additionally, the Company is projecting approximately 21% return on capital employed for 2021.

Production & Operations Update

Third quarter 2021 total production averaged 331.4 MBoepd. Third quarter 2021 oil production averaged 157.2 MBopd. Third quarter 2021 natural gas production averaged 1,046 MMcfpd. The following table provides the Company’s average daily production by region for the periods presented.

3Q

3Q

YTD

YTD

Boe per day

2021

2020

2021

2020

Bakken

167,604

160,661

167,632

150,366

South

152,543

129,583

147,646

129,559

All other

11,260

6,757

10,824

6,997

Total

331,407

297,001

326,102

286,922

Financial Update

“We are delivering strong competitive cash flow this year, as demonstrated by our 14% projected free cash flow yield even after our stock price has nearly tripled year-to-date. The third consecutive increase in our quarterly dividend underscores confidence in our sustainable free cash flow. Additionally, our corporate returns continue to expand, with a projected 21% return on capital employed in 2021 highlighting enhanced value creation. Free cash flow, return on capital employed and other financial metrics should further improve pending our recent Permian acquisition,” said John Hart, Senior Vice President, Chief Financial Officer & Chief Strategy Officer.

The Company has updated its 2021 guidance, as shown in the table at the conclusion of this press release.

Three Months Ended

Nine Months Ended

3Q21 Financial Update

September 30, 2021

September 30, 2021

Cash and Cash Equivalents

$693.6 million

Total Debt

$4.74billion

Net Debt (non-GAAP)(1) 

$4.05billion

Average Net Sales Price (non-GAAP)(1)

Per Barrel of Oil

$66.48

$60.79

Per Mcf of Gas

$4.62

$4.38

Per Boe

$46.07

$43.04

Production Expense per Boe

$3.39

$3.29

Total G&A Expenses per Boe

$1.92

$1.87

Crude Oil Net Sales Price Discount to NYMEX ($/Bbl)

($4.09)

($4.13)

Natural Gas Net Sales Price Premium to NYMEX ($/Mcf)

$0.62

$1.17

Non-Acquisition Capital Expenditures attributable to CLR

$383.7 million

$966.6 million

Exploration & Development Drilling & Completion

$312.3million

$784.1 million

Leasehold and minerals

$20.0million

$43.5 million

Workovers, Recompletions and Other

$51.4million

$139.0 million

Minerals attributable to FNV 

$6.0million

$9.7 million

(1) Net debt and net sales prices represent non-GAAP financial measures. Further information about these non-GAAP financial measures as well as reconciliations to the most directly comparable U.S. GAAP financial measures are provided subsequently under the header Non-GAAP Financial Measures.

The following table provides the Company’s production results, per-unit operating costs, results of operations and certain non-GAAP financial measures for the periods presented. Average net sales prices exclude any effect of derivative transactions. Per-unit expenses have been calculated using sales volumes.

Three months ended September 30,

Nine months ended September 30,

2021

2020

2021

2020

Average daily production:

Crude oil (Bbl per day)

157,153

169,265

158,609

155,088

Natural gas (Mcf per day)

1,045,521

766,416

1,004,954

791,005

Crude oil equivalents (Boe per day)

331,407

297,001

326,102

286,922

Average net sales prices (non-GAAP), excluding effect from derivatives: (1)

Crude oil ($/Bbl)

$           66.48

$           35.93

$            60.79

$           33.71

Natural gas ($/Mcf)

$             4.62

$             0.98

$              4.38

$             0.72

Crude oil equivalents ($/Boe)

$           46.07

$           23.23

$            43.04

$           20.21

Production expenses ($/Boe) 

$             3.39

$             3.19

$              3.29

$             3.45

Production taxes (% of net crude oil and gas sales)

7.3%

7.8%

7.3%

8.3%

DD&A ($/Boe)

$           15.29

$           16.58

$            16.26

$           16.37

Total general and administrative expenses ($/Boe) (2)

$             1.92

$             1.63

$              1.87

$             1.65

Net income (loss) attributable to Continental Resources (in thousands) 

$       369,328

$        (79,422)

$        918,295

$      (504,372)

Diluted net income (loss) per share attributable to Continental Resources

$             1.01

$            (0.22)

$              2.52

$            (1.39)

Adjusted net income (loss) (non-GAAP) (in thousands) (1) 

$       437,237

$        (58,871)

$     1,048,893

$      (342,139)

Adjusted diluted net income (loss) per share (non-GAAP) (1)

$             1.20

$            (0.16)

$              2.88

$            (0.95)

Net cash provided by operating activities (in thousands)

$    1,015,535

$        291,197

$     2,728,653

$        934,767

EBITDAX (non-GAAP) (in thousands) (1)

$    1,121,294

$        473,311

$     3,074,868

$     1,103,571

(1) Net sales prices, adjusted net income (loss), adjusted diluted net income (loss) per share, and EBITDAX represent non-GAAP financial measures. Further information about these non-GAAP financial measures as well as reconciliations to the most directly comparable U.S. GAAP financial measures are provided subsequently under the header Non-GAAP Financial Measures.

(2) Total general and administrative expense is comprised of cash general and administrative expense and non-cash equity compensation expense. Cash general and administrative expense per Boe was $1.45, $1.04, $1.37, and $1.04 for 3Q 2021, 3Q 2020, YTD 2021, and YTD 2020, respectively. Non-cash equity compensation expense per Boe was $0.47, $0.59, $0.50, and $0.61 for 3Q 2021, 3Q 2020, YTD 2021, and YTD 2020, respectively.

Third Quarter Earnings Conference Call

The Company plans to host a conference call to discuss third quarter 2021 results on Thursday, November 4, 2021 at 11:00 a.m. ET (10:00 a.m. CT). Those wishing to listen to the conference call may do so via the Company’s website at www.CLR.com or by phone:

Time and date:            11:00 a.m. ETThursday, November 4, 2021
Dial-in:                         1-888-317-6003
Intl. dial-in:                   1-412-317-6061
Conference ID:             8481323

A replay of the call will be available for 14 days on the Company’s website or by dialing:

Replay number:          1-877-344-7529
Intl. replay:                  1-412-317-0088
Conference ID:           10160546

The Company plans to publish a third quarter 2021 summary presentation to its website at www.CLR.com prior to the start of its conference call on Thursday, November 4, 2021.

About Continental Resources

Continental Resources (NYSE: CLR) is a top 10 independent oil producer in the U.S. and a leader in America’s energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and the largest producer in the nation’s premier oil field, the Bakken play of North Dakota and Montana. The Company has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the STACK play. The Company also has a newly acquired position in the Powder River Basin play of Wyoming. With a focus on the exploration and production of oil, Continental has unlocked the technology and resources vital to American energy independence and our nation’s leadership in the new world oil market. In 2021, the Company will celebrate 54 years of operations. For more information, please visit www.CLR.com.

Cautionary Statement for the Purpose of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995

This press release includes “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 included in this press release other than statements of historical fact, including, but not limited to, forecasts or expectations regarding the Company’s business and statements or information concerning the Company’s future operations, performance, financial condition, production and reserves, schedules, plans, timing of development, rates of return, budgets, costs, business strategy, objectives, and cash flows are forward-looking statements. When used in this press release, the words “could,” “may,” “believe,” “anticipate,” “intend,” “estimate,” “expect,” “project,” “budget,” “target,” “plan,” “continue,” “potential,” “guidance,” “strategy,” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain such identifying words.

Forward-looking statements are based on the Company’s current expectations and assumptions about future events and currently available information as to the outcome and timing of future events. Although the Company believes these assumptions and expectations are reasonable, they are inherently subject to numerous business, economic, competitive, regulatory and other risks and uncertainties, most of which are difficult to predict and many of which are beyond the Company’s control. No assurance can be given that such expectations will be correct or achieved or that the assumptions are accurate. The risks and uncertainties include, but are not limited to, commodity price volatility; the geographic concentration of our operations; financial market and economic volatility; the effects of any national or international health crisis; the inability to access needed capital; the risks and potential liabilities inherent in crude oil and natural gas drilling and production and the availability of insurance to cover any losses resulting therefrom; difficulties in estimating proved reserves and other reserves-based measures; declines in the values of our crude oil and natural gas properties resulting in impairment charges; our ability to replace proved reserves and sustain production; our ability to pay future dividends or complete share repurchases; the availability or cost of equipment and oilfield services; leasehold terms expiring on undeveloped acreage before production can be established; our ability to project future production, achieve targeted results in drilling and well operations and predict the amount and timing of development expenditures; the availability and cost of transportation, processing and refining facilities; legislative and regulatory changes adversely affecting our industry and our business, including initiatives related to hydraulic fracturing and greenhouse gas emissions; increased market and industry competition, including from alternative fuels and other energy sources; and the other risks described under Part I, Item 1A. Risk Factors and elsewhere in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, registration statements and other reports filed from time to time with the SEC, and other announcements the Company makes from time to time.

Readers are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which such statement is made. Should one or more of the risks or uncertainties described in this press release occur, or should underlying assumptions prove incorrect, the Company’s actual results and plans could differ materially from those expressed in any forward-looking statements. All forward-looking statements are expressly qualified in their entirety by this cautionary statement. Except as otherwise required by applicable law, the Company undertakes no obligation to publicly correct or update any forward-looking statement whether as a result of new information, future events or circumstances after the date of this report, or otherwise.

Readers are cautioned that initial production rates are subject to decline over time and should not be regarded as reflective of sustained production levels. In particular, production from horizontal drilling in shale oil and natural gas resource plays and tight natural gas plays that are stimulated with extensive pressure fracturing are typically characterized by significant early declines in production rates.

We use the term “EUR” or “estimated ultimate recovery” to describe our best estimate of recoverable oil and natural gas hydrocarbon quantities. Actual reserves recovered may differ from estimated quantities. EUR data included herein, if any, remain subject to change as more well data is analyzed.

Investor Contact:   

Media Contact:

Rory Sabino      

Kristin Thomas

Vice President, Investor Relations        

Senior Vice President, Public Relations

405-234-9620            

405-234-9480

[email protected]   

[email protected]

Lucy Spaay

Investor Relations Analyst

405-774-5878 


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