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Continental Resources First Quarter 2020 Results

Share Print Bookmark    |    Monday,May 11,2020

Continental Resources, Inc. reported its Q1 2020 results.

Highlights:

• 360,841 Boepd Average Daily 1Q20 Production; up 9% YoY (56% Oil)

• Lowest Cost Producer amongst Oil-Weighted Peers - $3.61 Production Expense per Boe and $1.31 Total G&A per Boe in 1Q20

• Approx. $55 MM Reduction to 2020 G&A through Ongoing Cost Savings Evaluation

• $650.7 MM Capex in 1Q20; 2020 Capex Tracking 3% to 5% below Previously Revised $1.2 B Budget

• 0 Stim Crews in the Bakken and Averaging 1 Stim Crew in OK through Remainder of 2020

• 0 Rigs Reduced to 4 by YE20 (80% Reduction from Jan 2020)

• $139 MM of Bonds Retired in March/April at a 53% Weighted Average Discount to Par

• Strong Portfolio Optionality and Liquidity: Positions Company for Market Recovery

• 70% of Operated Oil Production Voluntarily Curtailed in May (60% Boepd Curtailed)

The Company reported a net loss of $185.7 million, or $0.51 per diluted share, for the quarter ended March 31, 2020. In first quarter 2020, typically excluded items in aggregate represented $158.1 million, or $0.43 per diluted share, of Continental's reported net loss. Adjusted net loss for first quarter 2020 was $27.6 million, or $0.08 per diluted share (non-GAAP). Net cash provided by operating activities for first quarter 2020 was $663.8 million and EBITDAX was $594.2 million (non-GAAP).

Adjusted net loss, adjusted net loss per share, 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.

CEO Bill Berry said: "This has been an unprecedented global market environment, which has seen crude oil demand fall by approximately 30% due to the COVID-19 pandemic. Continental is committed to preserving value over volumes. Our assets are secure and we are confident that this deferred production will bring more value to our shareholders in the months to come.

"Our first quarter results underscore the capital efficient and low cost nature of our assets. Continental is financially strong with ample liquidity and no imminent debt maturities. We remain keenly focused on preserving both our assets and shareholder value for better commodity prices in the future. I want to thank our teams for their safe, efficient and best-in-class operations during this time. We look towards a bright future for both Continental and the U.S. oil and natural gas industry."

Production Update

First quarter 2020 total production increased 9% over first quarter 2019, averaging 360,841 Boepd. First quarter 2020 oil production increased 3% over first quarter 2019, averaging 200,671 Bopd. First quarter 2020 natural gas production increased 16% over first quarter 2019, averaging 961.0 MMcfpd.

The following table provides the Company's average daily production by region for the periods presented.

Operations Update

President & COO Jack Stark added: "Our assets continued to deliver consistent and repeatable results in the first quarter. Ongoing operating improvements also drove further capital efficiencies, that continued to increase the barrels produced per dollar spent in both the Bakken and Oklahoma. Importantly, Continental remains a low cost leader amongst our oil-weighted peers. First quarter 2020 production expense per Boe and DD&A per Boe fell within our previous guidance and cash G&A per Boe was materially better. This is a testament to the commitment to excellence by our teams and the unmatched shareholder alignment that are fundamental parts of the culture here at Continental."

The Company is currently tracking 3% to 5% below its previously revised $1.2 billion Capex budget. The Company also expects to reduce 2020 G&A by approximately $55 million through its ongoing cost savings evaluation. The Company has 70% of operated oil production voluntarily curtailed in May, or 60% of total operated production on a Boe basis. With the added optionality of having over 75% of its world class assets held by production, the Company is well-positioned for a recovery in market conditions. The Company is currently operating 5 rigs and expects to reduce to 4 rigs by year end 2020. This is an 80% reduction from the beginning of 2020. The Company currently has zero stim crews running in the Bakken and expects to average 1 stim crew in the South for the remainder of 2020. Efficiencies continue to build across all aspects of the Company's operations that are positively impacting performance and reducing costs on a sustainable ongoing basis.

Bakken

In first quarter 2020, Bakken total production averaged 201,502 Boepd and oil production averaged 145,481 Bopd. During the quarter, the Company completed 47 gross (33 net) operated wells with first production. Early results from the Company's 2020 Bakken program continue to perform in line with Bakken program wells completed over the past three years. The Company is operating 2 rigs in the Bakken through year end 2020.

South

In first quarter 2020, South total production averaged 152,010 Boepd and oil production averaged 47,838 Bopd. During the quarter, the Company completed 31 gross (21 net) operated wells with first production. The Company is currently operating 3 rigs in the South, targeting 2 rigs by year end 2020.

Property Impairments

Property impairments increased to $222.5 million for first quarter 2020, compared to $25.3 million for first quarter 2019. Impairments of proved oil and gas properties totaled $181.0 million for first quarter 2020, which resulted from the significant decrease in commodity prices during the quarter. The impairments were recognized on legacy properties in the Red River Units ($166.5 million) and other various non-core properties in the North and South regions. Additionally, in response to decreased crude oil prices, the Company recognized a $24.5 million impairment in first quarter 2020 to reduce the value of its crude oil inventory to estimated net realizable value at March 31, 2020.

Financial Update

Given the uncertainty and volatility of rapidly evolving market conditions, as well as the execution of production curtailments across its operations, the Company is withdrawing all previously issued guidance for 2020 and suspending further guidance. The Company intends to monitor market conditions and issue new guidance at the appropriate time.