OKLAHOMA CITY, Feb. 18, 2019 /PRNewswire/ -- Continental
Resources, Inc. (NYSE: CLR) (the Company) today announced full-year
2018 and fourth quarter 2018 operating and financial results.
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The Company reported full-year 2018 net income of $988.3 million, or $2.64 per diluted share. The Company's net income
includes certain items typically excluded by the investment
community in published estimates, the result of which is referred
to as "adjusted net income." Typically excluded items in aggregate
represented $77.9 million, or
$0.20 per diluted share. Adjusted net
income for full-year 2018 was $1.07
billion, or $2.84 per diluted
share (non-GAAP). Net cash provided by operating activities for
full-year 2018 was $3.46 billion and
EBITDAX was $3.62 billion
(non-GAAP).
The Company reported net income of $197.7
million, or $0.53 per diluted
share, for the quarter ended December 31,
2018. In fourth quarter 2018, typically excluded items in
aggregate represented $3.9 million,
or $0.01 per diluted share, of
Continental's reported net income. Adjusted net income for fourth
quarter 2018 was $201.7 million, or
$0.54 per diluted share (non-GAAP).
Net cash provided by operating activities for fourth quarter 2018
was $955.3 million and EBITDAX was
$850.6 million (non-GAAP).
Adjusted net income, adjusted net income per share, free cash
flow, EBITDAX, 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. Also presented at the end of this press release is the
Company's calculation of return on capital employed for 2018.
"2018 was a breakout year of performance for Continental with
significant cash flow generation and debt reduction, as well as
corporate returns that compare favorably against our peers and are
competitive with other industries," said Harold Hamm, Chairman and Chief Executive
Officer. "In 2019, we will continue to deliver strong corporate
returns coupled with growth that can adjust to various market
conditions."
Production Update: 4Q18 Oil Production up 14% over 3Q18
Full-year 2018 production increased 23% over full-year 2017,
averaging 298,190 Boe per day. 2018 oil production increased 21%
over 2017, averaging 168,177 barrels of oil (Bo) per day. 2018
natural gas production averaged 780.1 million cubic feet (MMcf) per
day.
Fourth quarter 2018 production increased 9% over third quarter
2018 and 13% over fourth quarter 2017, averaging 324,001 Boe per
day. Fourth quarter 2018 oil production increased 14% over third
quarter 2018 and 11% over fourth quarter 2017, averaging 186,934 Bo
per day. Fourth quarter 2018 natural gas production averaged 822.4
MMcf per day.
The following table provides the Company's average daily
production by region for the periods presented.
|
|
4Q
|
|
3Q
|
|
4Q
|
|
FY
|
|
FY
|
Boe per
day
|
|
2018
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
North
Region:
|
|
|
|
|
|
|
|
|
|
|
North Dakota
Bakken
|
|
177,358
|
|
161,008
|
|
158,640
|
|
161,231
|
|
125,577
|
Montana
Bakken
|
|
6,478
|
|
6,635
|
|
6,958
|
|
6,569
|
|
7,415
|
Other
|
|
9,077
|
|
9,015
|
|
9,965
|
|
9,125
|
|
10,182
|
South
Region:
|
|
|
|
|
|
|
|
|
|
|
SCOOP
|
|
67,244
|
|
63,270
|
|
62,242
|
|
64,339
|
|
60,693
|
STACK
|
|
62,947
|
|
56,129
|
|
47,914
|
|
56,055
|
|
36,220
|
Other(1)
|
|
897
|
|
847
|
|
1,266
|
|
871
|
|
2,550
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
324,001
|
|
296,904
|
|
286,985
|
|
298,190
|
|
242,637
|
|
(1) Producing
properties comprising approximately 1,700 Boe per day of the
Company's Arkoma production were sold in September 2017.
|
Bakken: 183,836 Boepd Average Daily 4Q18 Production; up 10%
over 3Q18
The Company's full-year 2018 Bakken production increased 26%
over 2017, averaging 167,800 Boe per day. The Company's fourth
quarter 2018 Bakken production increased 10% over third quarter
2018 and 11% over fourth quarter 2017, averaging 183,836 Boe per
day. During the quarter, the Company completed 52 gross (34 net)
operated wells with first production flowing at an average initial
24-hour rate per well of 2,800 Boe per day.
"Continental has entered a new era of optimized full field
development in the Bakken where technology and operational
efficiencies have uplifted performance across the play," said
Jack Stark, President. "As we look
to 2019 and beyond, the Bakken will continue to underpin
Continental's sustainable, value-driven and oil-weighted
growth."
STACK: Another Over-Pressured Condensate Unit Outperforms
Parent Type Curve
The Company's fourth quarter 2018 STACK production increased 12%
over third quarter 2018 and 31% over fourth quarter 2017, averaging
62,947 Boe per day. During the quarter, the Company completed 19
gross (9 net) operated wells with first production flowing at an
average initial 24-hour rate per well of 3,645 Boe per day.
The Company recently completed another outstanding Meramec unit
in the over-pressured condensate window of STACK. The Boden unit
flowed at an impressive combined initial 24-hour rate of 14,071 Boe
per day, averaging 1,197 Bo per day per well and 20,961 Mcf per day
per well.
"Recent results from the Boden unit further validate
Continental's optimized density development and the high quality of
the over-pressured Meramec that underlies our acreage position in
STACK," said Gary Gould, Senior Vice
President of Production & Resource Development.
SCOOP: SpringBoard on Pace to Add 10% to CLR Net Oil
Production (3Q18-3Q19)
The Company's fourth quarter 2018 SCOOP production increased 6%
over third quarter 2018 and 8% over fourth quarter 2017, averaging
67,244 Boe per day. The Company completed 17 gross (14 net)
operated wells with first production in fourth quarter 2018. The
Company's fourth quarter 2018 SCOOP oil production increased 47%
over fourth quarter 2017, reflecting the decision made in early
2018 to shift to the Company's oil-weighted assets.
As previously announced in the Company's Project SpringBoard
conference call, Project SpringBoard is expected to add 10%, or
16,500 barrels of oil per day, to the Company's total net oil
production from third quarter 2018 to third quarter 2019. In fourth
quarter 2018, Project SpringBoard production growth was on pace,
producing an average 5,260 barrels of oil per day. The Company
currently has 45 gross operated wells waiting on completion in
Project SpringBoard with 18 gross operated wells in the Springer
reservoir and 27 gross operated wells in the Woodford and Sycamore reservoirs.
Approximately 12 rigs will be focused on Project SpringBoard in
2019, with approximately 7 rigs targeting the Springer and
approximately 5 rigs targeting the Woodford and Sycamore.
Financial Update
"Continental's 2018 performance signals a structural transition
to free cash flow generation through low cost operations and
development," said John Hart, Chief
Financial Officer. "Over the next five years, we are targeting free
cash flow generation, continued debt reduction and an average 12.5%
compound annual production growth rate to drive strong corporate
returns and continued shareholder value."
As of December 31, 2018, the
Company's balance sheet included approximately $282.7 million in cash and cash equivalents,
$5.77 billion in total debt and
$5.49 billion in net debt (non-GAAP).
The Company anticipates further reducing net debt to $5 billion late in 2019.
For full-year 2018, the Company's average net sales prices
excluding the effects of derivative positions were $59.19 per barrel of oil and $3.01 per Mcf of gas, or $41.25 per Boe. The Company remains unhedged on
oil. Production expense per Boe was $3.59 for full-year 2018, a record annual low for
the Company and well within annual guidance of $3.50 to $3.75.
Non-acquisition capital expenditures for full-year 2018 totaled
approximately $2.8 billion, including
$2.4 billion in exploration and
development drilling and completion, $276.4
million in leasehold and minerals, and $198.8 million in workovers, recompletions and
other.
In fourth quarter 2018, the Company's average net sales prices
excluding the effects of derivative positions were $50.06 per barrel of oil and $3.26 per Mcf of gas, or $37.13 per Boe. Production expense per Boe was
$3.50 for fourth quarter 2018.
Non-acquisition capital expenditures for fourth quarter 2018
totaled approximately $742.6 million,
including $611.0 million in
exploration and development drilling and completion, $59.0 million in leasehold and minerals, and
$72.6 million in workovers,
recompletions and other.
The Company's 2019 guidance remains as announced on February 13, 2019 and can be found at the
conclusion of this press release.
CLR's Five Year Vision Targets
Over the next five years, the Company is targeting an average
12.5% compound annual production growth rate from existing
inventory. The Company is also targeting an average annual free
cash flow of $500 million per year at
$60 per barrel WTI. Individual years
may vary above or below these targets depending on the timing of
future projects.
In addition to cash flow generation, the Company expects ROCE to
remain strong over the next five years, competing against other
energy companies as well as other industries. The Company is
targeting average annual ROCE of approximately 14.5% per year over
the five years at $60 per barrel
WTI.
The Company expects capital allocation between its North and
South assets to be reasonably consistent with the historical norm
of approximately 50% to 60% in the North and approximately 40% to
50% in the South.
The Company's operating expenses on a per Boe basis are expected
to remain relatively consistent or improve. Additionally, the
Company expects oil and gas differentials to improve with continued
infrastructure directed toward coastal markets, which will allow
the Company to benefit from access to both premium domestic and
global markets.
The Company's five year vision is underpinned by the depth and
quality of current inventory. The Company estimates less than 30%
of current inventory is to be developed under this five year
vision. The five year inventory is projected to deliver a 60%
blended average rate of return (ROR) at $60 per barrel WTI.
The following table provides the Company's production results,
per-unit operating costs, results of operations and certain
non-GAAP financial measures for the periods presented. Average net
sales prices exclude any effect of derivative transactions.
Per-unit expenses have been calculated using sales volumes.
|
Three months ended
December 31,
|
|
Year ended December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Average daily
production:
|
|
|
|
|
|
|
|
Crude oil (Bbl per
day)
|
186,934
|
|
168,066
|
|
168,177
|
|
138,455
|
Natural gas (Mcf per
day)
|
822,402
|
|
713,518
|
|
780,083
|
|
625,093
|
Crude oil equivalents
(Boe per day)
|
324,001
|
|
286,985
|
|
298,190
|
|
242,637
|
Average net sales
prices (non-GAAP), excluding effect from derivatives:
(1)
|
|
|
|
|
|
|
|
Crude oil
($/Bbl)
|
$50.06
|
|
$51.16
|
|
$59.19
|
|
$45.70
|
Natural gas
($/Mcf)
|
$3.26
|
|
$3.30
|
|
$3.01
|
|
$2.93
|
Crude oil equivalents
($/Boe)
|
$37.13
|
|
$38.27
|
|
$41.25
|
|
$33.65
|
Production expenses
($/Boe)
|
$3.50
|
|
$3.17
|
|
$3.59
|
|
$3.66
|
Production taxes (%
of net crude oil and gas sales)
|
8.2%
|
|
7.3%
|
|
7.9%
|
|
7.0%
|
DD&A
($/Boe)
|
$16.41
|
|
$17.93
|
|
$17.09
|
|
$18.89
|
Total general and
administrative expenses ($/Boe) (2)
|
$1.65
|
|
$2.30
|
|
$1.69
|
|
$2.16
|
Net income
attributable to Continental Resources (in thousands)
(3)
|
$197,738
|
|
$841,914
|
|
$988,317
|
|
$789,447
|
Diluted net income
per share attributable to Continental Resources
|
$0.53
|
|
$2.25
|
|
$2.64
|
|
$2.11
|
Adjusted net income
(non-GAAP) (in thousands) (1)
|
$201,686
|
|
$153,660
|
|
$1,066,237
|
|
$190,803
|
Adjusted diluted net
income per share (non-GAAP) (1)
|
$0.54
|
|
$0.41
|
|
$2.84
|
|
$0.51
|
Net cash provided by
operating activities (in thousands)
|
$955,267
|
|
$731,125
|
|
$3,456,008
|
|
$2,079,106
|
EBITDAX (non-GAAP)
(in thousands) (1)
|
$850,640
|
|
$837,887
|
|
$3,623,373
|
|
$2,363,617
|
|
(1) Net sales prices,
adjusted net income, adjusted diluted net income 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 at the end of this press release.
|
|
(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 $1.18, $1.80,
$1.25, and $1.64 for 4Q 2018, 4Q 2017, FY 2018 and FY 2017,
respectively. Non-cash equity compensation expense per Boe was
$0.47, $0.50, $0.44, and $0.52 for 4Q 2018, 4Q 2017, FY 2018 and FY
2017, respectively.
|
|
(3) In December 2017,
the Tax Cuts and Jobs Act was signed into law, which among other
things reduced the U.S. federal corporate income tax rate from 35%
to 21% effective January 1, 2018. In accordance with U.S. GAAP, the
Company remeasured its deferred income tax assets and liabilities
as of December 31, 2017 to reflect the reduced tax rate, which
resulted in a one-time increase in net income of approximately
$713.7 million ($1.91 per diluted share) for the three and twelve
months ended December 31, 2017.
|
Fourth Quarter Earnings Conference Call
Continental plans to host a conference call to discuss fourth
quarter and full-year 2018 results on Tuesday, February 19, 2019 at 12:00 p.m. ET (11:00 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:
|
12 p.m. ET, Tuesday,
February 19, 2019
|
Dial-in:
|
844-309-6572
|
Intl.
dial-in:
|
484-747-6921
|
Conference
ID:
|
5856777
|
A replay of the call will be available for 14 days on the
Company's website or by dialing:
Replay
number:
|
855-859-2056 or
404-537-3406
|
Intl.
replay:
|
800-585-8367
|
Conference
ID:
|
5856777
|
Continental plans to publish a fourth quarter and full-year 2018
summary presentation to its website at www.CLR.com prior to the
start of its conference call on February
19, 2019.
Upcoming Conferences
Members of Continental's management team expect to participate
in the following investment conference:
March 25-26,
2019 Scotia Howard Weil 47th Annual
Energy Conference – New Orleans,
LA
Presentation materials for the conference mentioned above will
be available on the Company's web site at www.CLR.com prior to the
start of the Company's presentation at such conference.
About Continental Resources
Continental Resources (NYSE: CLR) is a top 10 independent oil
producer in the U.S. Lower 48 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 also has significant
positions in Oklahoma, including
its SCOOP Woodford and SCOOP Springer discoveries and the STACK
plays. 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 2019, the Company will celebrate 52 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 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; 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; 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, 2017, and once filed, for the year
ended December 31, 2018, 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 potentially recoverable oil and natural gas hydrocarbon
quantities. We include these estimates to demonstrate what we
believe to be the potential for future drilling and production on
our properties. These estimates are by their nature much more
speculative than estimates of proved reserves and require
substantial capital spending to implement recovery. Actual
locations drilled and quantities that may be ultimately recovered
from our properties will differ substantially. EUR data included
herein 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
|
|
Rory.Sabino@CLR.com
|
Kristin.Thomas@CLR.com
|
|
|
|
|
Lucy
Guttenberger
|
|
|
Senior Investor
Relations Associate
|
|
|
405-774-5878
|
|
|
Lucy.Guttenberger@CLR.com
|
|
|
Continental
Resources, Inc. and Subsidiaries
|
Consolidated
Statements of Income
|
|
|
Three months ended
December 31,
|
|
Year ended December
31,
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenues:
|
In thousands,
except per share data
|
Crude oil and natural
gas sales
|
$
1,154,104
|
|
$
1,017,750
|
|
$
4,678,722
|
|
$
2,982,966
|
Gain (loss) on
natural gas derivatives, net
|
(19,394)
|
|
8,165
|
|
(23,930)
|
|
91,647
|
Crude oil and natural
gas service operations
|
14,584
|
|
21,257
|
|
54,794
|
|
46,215
|
Total
revenues
|
1,149,294
|
|
1,047,172
|
|
4,709,586
|
|
3,120,828
|
|
|
|
|
|
|
|
|
Operating costs and
expenses:
|
|
|
|
|
|
|
|
Production
expenses
|
104,258
|
|
84,371
|
|
390,423
|
|
324,214
|
Production
taxes
|
90,393
|
|
73,816
|
|
353,140
|
|
208,278
|
Transportation
expenses
|
49,028
|
|
-
|
|
191,587
|
|
-
|
Exploration
expenses
|
3,295
|
|
2,802
|
|
7,642
|
|
12,393
|
Crude oil and natural
gas service operations
|
4,205
|
|
6,216
|
|
21,639
|
|
16,880
|
Depreciation,
depletion, amortization and accretion
|
488,416
|
|
476,732
|
|
1,859,327
|
|
1,674,901
|
Property
impairments
|
38,494
|
|
27,552
|
|
125,210
|
|
237,370
|
General and
administrative expenses
|
49,201
|
|
61,294
|
|
183,569
|
|
191,706
|
Litigation
settlement
|
-
|
|
59,600
|
|
-
|
|
59,600
|
Net gain on sale of
assets and other
|
(8,410)
|
|
(54,679)
|
|
(16,671)
|
|
(53,915)
|
Total operating costs
and expenses
|
818,880
|
|
737,704
|
|
3,115,866
|
|
2,671,427
|
Income from
operations
|
330,414
|
|
309,468
|
|
1,593,720
|
|
449,401
|
Other income
(expense):
|
|
|
|
|
|
|
|
Interest
expense
|
(69,441)
|
|
(75,823)
|
|
(293,032)
|
|
(294,495)
|
Loss on
extinguishment of debt
|
-
|
|
(554)
|
|
(7,133)
|
|
(554)
|
Other
|
1,016
|
|
506
|
|
3,247
|
|
1,715
|
|
(68,425)
|
|
(75,871)
|
|
(296,918)
|
|
(293,334)
|
Income before income
taxes
|
261,989
|
|
233,597
|
|
1,296,802
|
|
156,067
|
(Provision) benefit
for income taxes
|
(62,868)
|
|
608,317
|
|
(307,102)
|
|
633,380
|
Net income
|
199,121
|
|
841,914
|
|
989,700
|
|
789,447
|
Net income
attributable to noncontrolling interests
|
1,383
|
|
-
|
|
1,383
|
|
-
|
Net income
attributable to Continental Resources
|
$
197,738
|
|
$
841,914
|
|
$
988,317
|
|
$
789,447
|
Net income per share
attributable to Continental Resources:
|
|
|
|
|
|
|
|
Basic
|
$
0.53
|
|
$
2.27
|
|
$
2.66
|
|
$
2.13
|
Diluted
|
$
0.53
|
|
$
2.25
|
|
$
2.64
|
|
$
2.11
|
Continental
Resources, Inc. and Subsidiaries
|
Consolidated Balance
Sheets
|
|
|
December 31,
2018
|
|
December 31,
2017
|
Assets
|
In
thousands
|
Cash and cash
equivalents
|
$
|
282,749
|
|
$
|
43,902
|
Other current
assets
|
|
1,129,612
|
|
|
1,207,823
|
Net property and
equipment (1)
|
|
13,869,800
|
|
|
12,933,789
|
Other noncurrent
assets
|
|
15,786
|
|
|
14,137
|
Total
assets
|
$
|
15,297,947
|
|
$
|
14,199,651
|
|
|
|
|
|
|
Liabilities and
equity
|
|
|
|
|
|
Current
liabilities
|
$
|
1,387,509
|
|
$
|
1,330,242
|
Long-term debt, net
of current portion
|
|
5,765,989
|
|
|
6,351,405
|
Other noncurrent
liabilities
|
|
1,722,588
|
|
|
1,386,801
|
Equity attributable
to Continental Resources
|
|
6,145,133
|
|
|
5,131,203
|
Equity attributable
to noncontrolling interests
|
|
276,728
|
|
|
-
|
Total liabilities and
equity
|
$
|
15,297,947
|
|
$
|
14,199,651
|
|
(1) Balance is net of
accumulated depreciation, depletion and amortization of $10.81
billion and $9.08 billion as of December 31, 2018 and December 31,
2017, respectively.
|
Continental
Resources, Inc. and Subsidiaries
|
Consolidated
Statements of Cash Flows
|
|
|
|
Three months ended
December 31,
|
|
Year ended December
31,
|
In
thousands
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Net income
|
|
$
|
199,121
|
|
$
|
841,914
|
|
$
|
989,700
|
|
$
|
789,447
|
Adjustments to
reconcile net income to net cash provided by operating
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-cash
expenses
|
|
|
576,033
|
|
|
(70,395)
|
|
|
2,340,600
|
|
|
1,288,244
|
Changes in assets and
liabilities
|
|
|
180,113
|
|
|
(40,394)
|
|
|
125,708
|
|
|
1,415
|
Net cash provided by
operating activities
|
|
|
955,267
|
|
|
731,125
|
|
|
3,456,008
|
|
|
2,079,106
|
Net cash used in
investing activities
|
|
|
(756,689)
|
|
|
(434,591)
|
|
|
(2,860,172)
|
|
|
(1,808,845)
|
Net cash provided by
(used in) financing activities
|
|
|
71,319
|
|
|
(263,395)
|
|
|
(356,934)
|
|
|
(243,034)
|
Effect of exchange
rate changes on cash
|
|
|
(44)
|
|
|
(2)
|
|
|
(55)
|
|
|
32
|
Net change in cash
and cash equivalents
|
|
|
269,853
|
|
|
33,137
|
|
|
238,847
|
|
|
27,259
|
Cash and cash
equivalents at beginning of period
|
|
|
12,896
|
|
|
10,765
|
|
|
43,902
|
|
|
16,643
|
Cash and cash
equivalents at end of period
|
|
$
|
282,749
|
|
$
|
43,902
|
|
$
|
282,749
|
|
$
|
43,902
|
Non-GAAP adjusted net income and adjusted net income per
share attributable to Continental
Our presentation of adjusted net income and adjusted net income
per share that exclude the effect of certain items are non-GAAP
financial measures. Adjusted net income and adjusted net income per
share represent net income and diluted net income per share
determined under U.S. GAAP without regard to non-cash gains and
losses on derivative instruments, property impairments, losses on
certain litigation settlements, gains and losses on asset sales,
losses on extinguishment of debt, and the impact of U.S. tax reform
legislation as applicable. Management believes these measures
provide useful information to analysts and investors for analysis
of our operating results. In addition, management believes these
measures are used by analysts and others in valuation, comparison
and investment recommendations of companies in the oil and gas
industry to allow for analysis without regard to an entity's
specific derivative portfolio, impairment methodologies, and
property dispositions. Adjusted net income and adjusted net income
per share should not be considered in isolation or as an
alternative to, or more meaningful than, net income or diluted net
income per share as determined in accordance with U.S. GAAP and may
not be comparable to other similarly titled measures of other
companies. The following table reconciles net income and diluted
net income per share as determined under U.S. GAAP to adjusted net
income and adjusted diluted net income per share for the periods
presented.
|
|
Three months ended
December 31,
|
|
|
2018
|
|
2017
|
In thousands,
except per share data
|
|
$
|
|
Diluted
EPS
|
|
$
|
|
Diluted
EPS
|
Net income
attributable to Continental Resources (GAAP)
|
|
$
197,738
|
|
$
0.53
|
|
$841,914
|
|
$
2.25
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non-cash (gain) loss
on derivatives
|
|
(25,022)
|
|
|
|
7,450
|
|
|
Property
impairments
|
|
38,494
|
|
|
|
27,552
|
|
|
Litigation
settlement
|
|
-
|
|
|
|
59,600
|
|
|
Gain on sale of
assets
|
|
(8,410)
|
|
|
|
(54,420)
|
|
|
Loss on
extinguishment of debt
|
|
-
|
|
|
|
554
|
|
|
Total tax effect of
adjustments (1)
|
|
(1,114)
|
|
|
|
(15,335)
|
|
|
Tax benefit from US
tax reform legislation
|
|
-
|
|
|
|
(713,655)
|
|
|
Total adjustments,
net of tax
|
|
3,948
|
|
0.01
|
|
(688,254)
|
|
(1.84)
|
Adjusted net income
(non-GAAP)
|
|
$
201,686
|
|
$
0.54
|
|
$153,660
|
|
$
0.41
|
Weighted average
diluted shares outstanding
|
|
374,525
|
|
|
|
373,764
|
|
|
Adjusted diluted net
income per share (non-GAAP)
|
|
$
0.54
|
|
|
|
$0.41
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31,
|
|
|
2018
|
|
2017
|
In thousands,
except per share data
|
|
$
|
|
Diluted
EPS
|
|
$
|
|
Diluted
EPS
|
Net income
attributable to Continental Resources (GAAP)
|
|
$
988,317
|
|
$
2.64
|
|
$789,447
|
|
$
2.11
|
Adjustments:
|
|
|
|
|
|
|
|
|
Non-cash gain on
derivatives
|
|
(13,009)
|
|
|
|
(58,031)
|
|
|
Property
impairments
|
|
125,210
|
|
|
|
237,370
|
|
|
Litigation
settlement
|
|
-
|
|
|
|
59,600
|
|
|
Gain on sale of
assets
|
|
(16,671)
|
|
|
|
(55,124)
|
|
|
Loss on
extinguishment of debt
|
|
7,133
|
|
|
|
554
|
|
|
Total tax effect of
adjustments (1)
|
|
(24,743)
|
|
|
|
(69,358)
|
|
|
Tax benefit from US
tax reform legislation
|
|
-
|
|
|
|
(713,655)
|
|
|
Total adjustments,
net of tax
|
|
77,920
|
|
0.20
|
|
(598,644)
|
|
(1.60)
|
Adjusted net income
(non-GAAP)
|
|
$1,066,237
|
|
$
2.84
|
|
$190,803
|
|
$
0.51
|
Weighted average
diluted shares outstanding
|
|
374,838
|
|
|
|
373,768
|
|
|
Adjusted diluted net
income per share (non-GAAP)
|
|
$
2.84
|
|
|
|
$
0.51
|
|
|
|
(1) Computed by
applying a combined federal and state statutory tax rate of 24.5%
in effect for 2018 and 38% in effect for 2017 to the pre-tax amount
of adjustments associated with our operations in the United States
other than the 2017 tax benefit adjustment related to US tax reform
legislation.
|
Non-GAAP Net Debt
Net debt is a non-GAAP measure. We define net debt as total debt
less cash and cash equivalents as determined under U.S. GAAP. Net
debt should not be considered an alternative to, or more meaningful
than, total debt, the most directly comparable GAAP measure.
Management uses net debt to determine the Company's outstanding
debt obligations that would not be readily satisfied by its cash
and cash equivalents on hand. We believe this metric is useful to
analysts and investors in determining the Company's leverage
position since the Company has the ability to, and may decide to,
use a portion of its cash and cash equivalents to reduce debt. This
metric is sometimes presented as a ratio with EBITDAX in order to
provide investors with another means of evaluating the Company's
ability to service its existing debt obligations as well as any
future increase in the amount of such obligations. At December 31, 2018, the Company's total debt was
$5.77 billion and its net debt
amounted to $5.49 billion,
representing total debt of $5.77
billion less cash and cash equivalents of $282.7 million. From time to time the Company
provides forward-looking net debt forecasts; however, the Company
is unable to provide a quantitative reconciliation of the
forward-looking non-GAAP measure to the most directly comparable
forward-looking GAAP measure of total debt because management
cannot reliably quantify certain of the necessary components of
such forward-looking GAAP measure. The reconciling items in future
periods could be significant.
Non-GAAP EBITDAX
We use a variety of financial and operational measures to assess
our performance. Among these measures is EBITDAX, a non-GAAP
measure. We define EBITDAX as earnings before interest expense,
income taxes, depreciation, depletion, amortization and accretion,
property impairments, exploration expenses, non-cash gains and
losses resulting from the requirements of accounting for
derivatives, non-cash equity compensation expense, and losses on
extinguishment of debt as applicable. EBITDAX is not a measure of
net income or net cash provided by operating activities as
determined by U.S. GAAP.
Management believes EBITDAX is useful because it allows us to
more effectively evaluate our operating performance and compare the
results of our operations from period to period without regard to
our financing methods or capital structure. Further, we believe
EBITDAX is a widely followed measure of operating performance and
may also be used by investors to measure our ability to meet future
debt service requirements, if any. We exclude the items listed
above from net income/loss and net cash provided by operating
activities in arriving at EBITDAX because these amounts can vary
substantially from company to company within our industry depending
upon accounting methods and book values of assets, capital
structures and the method by which the assets were acquired.
EBITDAX should not be considered as an alternative to, or more
meaningful than, net income/loss or net cash provided by operating
activities as determined in accordance with U.S. GAAP or as an
indicator of a company's operating performance or liquidity.
Certain items excluded from EBITDAX are significant components in
understanding and assessing a company's financial performance, such
as a company's cost of capital and tax structure, as well as the
historic costs of depreciable assets, none of which are components
of EBITDAX. Our computations of EBITDAX may not be comparable to
other similarly titled measures of other companies.
The following table provides a reconciliation of our net income
to EBITDAX for the periods presented.
|
|
Three months ended
December 31,
|
|
Year ended December
31,
|
In
thousands
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net income
|
|
$
|
199,121
|
|
$
|
841,914
|
|
$
|
989,700
|
|
$
|
789,447
|
Interest
expense
|
|
|
69,441
|
|
|
75,823
|
|
|
293,032
|
|
|
294,495
|
Provision (benefit)
for income taxes
|
|
|
62,868
|
|
|
(608,317)
|
|
|
307,102
|
|
|
(633,380)
|
Depreciation,
depletion, amortization and accretion
|
|
|
488,416
|
|
|
476,732
|
|
|
1,859,327
|
|
|
1,674,901
|
Property
impairments
|
|
|
38,494
|
|
|
27,552
|
|
|
125,210
|
|
|
237,370
|
Exploration
expenses
|
|
|
3,295
|
|
|
2,802
|
|
|
7,642
|
|
|
12,393
|
Impact from
derivative instruments:
|
|
|
|
|
|
|
|
|
|
|
|
|
Total (gain) loss on
derivatives, net
|
|
|
19,394
|
|
|
(8,417)
|
|
|
23,930
|
|
|
(90,432)
|
Total cash (paid)
received on derivatives, net
|
|
|
(44,416)
|
|
|
15,867
|
|
|
(36,939)
|
|
|
32,401
|
Non-cash (gain) loss
on derivatives, net
|
|
|
(25,022)
|
|
|
7,450
|
|
|
(13,009)
|
|
|
(58,031)
|
Non-cash equity
compensation
|
|
|
14,027
|
|
|
13,377
|
|
|
47,236
|
|
|
45,868
|
Loss on
extinguishment of debt
|
|
|
-
|
|
|
554
|
|
|
7,133
|
|
|
554
|
EBITDAX
(non-GAAP)
|
|
$
|
850,640
|
|
$
|
837,887
|
|
$
|
3,623,373
|
|
$
|
2,363,617
|
The following table provides a reconciliation of our net cash
provided by operating activities to EBITDAX for the periods
presented.
|
|
Three months ended
December 31,
|
|
Year ended December
31,
|
In
thousands
|
|
|
2018
|
|
|
2017
|
|
|
2018
|
|
|
2017
|
Net cash provided by
operating activities
|
|
$
|
955,267
|
|
$
|
731,125
|
|
$
|
3,456,008
|
|
$
|
2,079,106
|
Current income tax
provision (benefit)
|
|
|
2
|
|
|
(7,781)
|
|
|
(7,776)
|
|
|
(7,781)
|
Interest
expense
|
|
|
69,441
|
|
|
75,823
|
|
|
293,032
|
|
|
294,495
|
Exploration expenses,
excluding dry hole costs
|
|
|
3,149
|
|
|
2,783
|
|
|
7,495
|
|
|
12,217
|
Litigation
settlement
|
|
|
-
|
|
|
(59,600)
|
|
|
-
|
|
|
(59,600)
|
Gain on sale of
assets, net
|
|
|
8,410
|
|
|
54,420
|
|
|
16,671
|
|
|
55,124
|
Other, net
|
|
|
(5,516)
|
|
|
723
|
|
|
(16,349)
|
|
|
(8,529)
|
Changes in assets and
liabilities
|
|
|
(180,113)
|
|
|
40,394
|
|
|
(125,708)
|
|
|
(1,415)
|
EBITDAX
(non-GAAP)
|
|
$
|
850,640
|
|
$
|
837,887
|
|
$
|
3,623,373
|
|
$
|
2,363,617
|
Non-GAAP Free Cash Flow
Our presentation of projected free cash flow is a non-GAAP
measure. We define projected free cash flow as cash flows from
operations before changes in working capital items, less capital
expenditures, plus noncontrolling interest capital contributions,
less distributions to noncontrolling interests. Noncontrolling
interest capital contributions and distributions primarily relate
to our new relationship formed with Franco-Nevada in 2018 to fund a
portion of certain mineral acquisitions which are included in our
capital expenditures and operating results. Free cash flow is not a
measure of net income or operating cash flows as determined by U.S.
GAAP and should not be considered an alternative to, or more
meaningful than, the comparable GAAP measure, and free cash flow
does not represent residual cash flows available for discretionary
expenditures. Management believes that this measure is useful to
management and investors as a measure of a company's ability to
internally fund its capital expenditures and to service or incur
additional debt. From time to time the Company provides
forward-looking free cash flow estimates or targets; however, the
Company is unable to provide a quantitative reconciliation of the
forward-looking non-GAAP measure to its most directly comparable
forward-looking GAAP measure because management cannot reliably
quantify certain of the necessary components of such
forward-looking GAAP measure. The reconciling items in future
periods could be significant.
Non-GAAP Net Sales Prices
On January 1, 2018, we adopted
Accounting Standards Update 2016-08, Revenue from Contracts with
Customers (Topic 606): Principal versus Agent Considerations
(Reporting Revenue Gross versus Net), which impacted the
presentation of our crude oil and natural gas revenues. We adopted
the new rules using a modified retrospective transition approach on
January 1, 2018 whereby changes have
been applied only to the most current period presented and prior
period results have not been adjusted to conform to current
presentation.
Under the new rules, revenues and transportation expenses
associated with production from our operated properties are now
reported on a gross basis compared to net presentation in the prior
year. For non-operated properties, we receive a net payment from
the operator for our share of sales proceeds which is net of costs
incurred by the operator, if any. Such non-operated revenues are
recognized at the net amount of proceeds received, consistent with
our historical practice. As a result, beginning January 1, 2018 the gross presentation of
revenues from our operated properties differs from the net
presentation of revenues from non-operated properties. This impacts
the comparability of certain operating metrics, such as per-unit
sales prices, when such metrics are prepared in accordance with
U.S. GAAP using gross presentation for some revenues and net
presentation for others.
In order to provide metrics prepared in a manner consistent with
how management assesses the Company's operating results, to achieve
comparability between operated and non-operated revenues, and to
achieve comparability with prior period metrics for analysis
purposes, we may present crude oil and natural gas sales net of
transportation expenses, which we refer to as "net crude oil and
natural gas sales," a non-GAAP measure. Average sales prices
calculated using net crude oil and natural gas sales are referred
to as "net sales prices," a non-GAAP measure, and are calculated by
taking revenues less transportation expenses divided by sales
volumes, whether for crude oil or natural gas, as applicable.
Management believes presenting our revenues and sales prices net of
transportation expenses is useful because it normalizes the
presentation differences between operated and non-operated revenues
and allows for a useful comparison of net realized prices to NYMEX
benchmark prices on a Company-wide basis.
The following table presents a reconciliation of crude oil and
natural gas sales (GAAP) to net crude oil and natural gas sales and
related net sales prices (non-GAAP) for the three and twelve months
ended December 31, 2018. Information
is also presented for the three and twelve months ended
December 31, 2017 for comparative
purposes.
|
|
Three months ended
December 31, 2018
|
|
Three months ended
December 31, 2017
|
In
thousands
|
|
Crude oil
|
|
Natural
gas
|
|
Total
|
|
Crude oil
|
|
Natural
gas
|
|
Total
|
Crude oil and natural
gas sales (GAAP)
|
|
$900,872
|
|
$253,232
|
|
$1,154,104
|
|
$800,871
|
|
$216,879
|
|
$1,017,750
|
Less: Transportation
expenses
|
|
(42,373)
|
|
(6,655)
|
|
(49,028)
|
|
—
|
|
—
|
|
—
|
Net crude oil and
natural gas sales (non-GAAP for 2018)
|
|
$858,499
|
|
$246,577
|
|
$1,105,076
|
|
$800,871
|
|
$216,879
|
|
$1,017,750
|
Sales volumes
(MBbl/MMcf/MBoe)
|
|
17,149
|
|
75,661
|
|
29,759
|
|
15,653
|
|
65,644
|
|
26,594
|
Net sales price
(non-GAAP for 2018)
|
|
$50.06
|
|
$3.26
|
|
$37.13
|
|
$51.16
|
|
$3.30
|
|
$38.27
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended December
31, 2018
|
|
Year ended December
31, 2017
|
In
thousands
|
|
Crude oil
|
|
Natural
gas
|
|
Total
|
|
Crude oil
|
|
Natural
gas
|
|
Total
|
Crude oil and natural
gas sales (GAAP)
|
|
$3,792,594
|
|
$886,128
|
|
$4,678,722
|
|
$2,313,862
|
|
$669,104
|
|
$2,982,966
|
Less: Transportation
expenses
|
|
(162,312)
|
|
(29,275)
|
|
(191,587)
|
|
—
|
|
—
|
|
—
|
Net crude oil and
natural gas sales (non-GAAP for 2018)
|
|
$3,630,282
|
|
$856,853
|
|
$4,487,135
|
|
$2,313,862
|
|
$669,104
|
|
$2,982,966
|
Sales volumes
(MBbl/MMcf/MBoe)
|
|
61,332
|
|
284,730
|
|
108,787
|
|
50,628
|
|
228,159
|
|
88,655
|
Net sales price
(non-GAAP for 2018)
|
|
$59.19
|
|
$3.01
|
|
$41.25
|
|
$45.70
|
|
$2.93
|
|
$33.65
|
Non-GAAP Cash General and Administrative Expenses per
Boe
Our presentation of cash general and administrative ("G&A")
expenses per Boe is a non-GAAP measure. We define cash G&A per
Boe as total G&A determined in accordance with U.S. GAAP less
non-cash equity compensation expenses, expressed on a per-Boe
basis. We report and provide guidance on cash G&A per Boe
because we believe this measure is commonly used by management,
analysts and investors as an indicator of cost management and
operating efficiency on a comparable basis from period to period.
In addition, management believes cash G&A per Boe is used by
analysts and others in valuation, comparison and investment
recommendations of companies in the oil and gas industry to allow
for analysis of G&A spend without regard to stock-based
compensation programs which can vary substantially from company to
company. Cash G&A per Boe should not be considered as an
alternative to, or more meaningful than, total G&A per Boe as
determined in accordance with U.S. GAAP and may not be comparable
to other similarly titled measures of other companies.
The following table reconciles total G&A per Boe as
determined under U.S. GAAP to cash G&A per Boe for the periods
presented.
|
|
Three months ended
December 31,
|
|
Year ended December
31,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Total G&A per Boe
(GAAP)
|
|
$1.65
|
|
$2.30
|
|
$1.69
|
|
$2.16
|
Less: Non-cash equity
compensation per Boe
|
|
(0.47)
|
|
(0.50)
|
|
(0.44)
|
|
(0.52)
|
Cash G&A per Boe
(non-GAAP)
|
|
$1.18
|
|
$1.80
|
|
$1.25
|
|
$1.64
|
Calculation of Return on Capital Employed (ROCE)
The following table shows the calculation of ROCE for 2018.
In
thousands
|
|
2018
|
|
|
|
Net income
attributable to Continental Resources
|
|
$
988,317
|
Impact from
derivative instruments:
|
|
|
Total (gain) loss on
derivatives, net
|
|
23,930
|
Total cash received
(paid), net
|
|
(36,939)
|
Non-cash (gain) loss
on derivatives, net
|
|
(13,009)
|
|
|
|
Provision for income
taxes
|
|
307,102
|
Non-cash equity
compensation
|
|
47,236
|
Interest
expense
|
|
293,032
|
Loss on
extinguishment of debt
|
|
7,133
|
Adjusted
EBIT
|
|
$
1,629,811
|
|
|
|
|
|
|
Equity attributable
to Continental Resources - beginning of 2018
|
|
$
5,131,203
|
Total debt -
beginning of 2018
|
|
6,353,691
|
Capital employed -
beginning of 2018
|
|
11,484,894
|
|
|
|
Equity attributable
to Continental Resources - end of 2018
|
|
6,145,133
|
Total debt - end of
2018
|
|
5,768,349
|
Capital employed -
end of 2018
|
|
11,913,482
|
|
|
|
Average capital
employed
|
|
$11,699,188
|
|
|
|
ROCE
|
|
13.9%
|
Continental
Resources, Inc.
|
2019
Guidance
|
As of February 18,
2019
|
|
|
|
|
|
|
|
|
|
|
|
2019
|
|
|
|
Full-year average oil
production
|
|
190,000 to 200,000 Bo
per day
|
Full-year average
natural gas production
|
|
790,000 to 810,000
Mcf per day
|
Capital expenditures
budget
|
|
$2.6
billion
|
|
|
|
Operating
Expenses:
|
|
|
Production expense per
Boe
|
|
$3.75 to
$4.25
|
Production tax (% of net oil
& gas revenue)
|
|
8.0% to
8.3%
|
Cash G&A expense per
Boe(1)
|
|
$1.25 to
$1.45
|
Non-cash equity compensation
per Boe
|
|
$0.45 to
$0.55
|
DD&A per Boe
|
|
$15.00 to
$17.00
|
|
|
|
Average Price
Differentials:
|
|
|
NYMEX WTI crude oil (per
barrel of oil)
|
|
($4.50) to
($5.50)
|
Henry Hub natural gas (per
Mcf)
|
|
$0.00 to
($0.50)
|
|
(1) Cash G&A is a
non-GAAP measure and excludes the range of values shown for
non-cash equity compensation per Boe in the item appearing
immediately below. Guidance for total G&A (cash and non-cash)
is an expected range of $1.70 to $2.00 per Boe.
|
View original
content:http://www.prnewswire.com/news-releases/continental-resources-reports-full-year-2018-and-4q18-results-300797501.html
SOURCE Continental Resources