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Continental Resources Second Quarter 2020 Results

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   |    Tuesday,August 04,2020

Continental Resources, Inc. announced second quarter 2020 operating and financial results.


Curtailed Operated Oil Volumes in 2Q20 Estimated to Generate $90 Million in Incremental Cash Flow from Operations at $40 WTI

  • Approximately 55% of Oil Volumes (7.8 MMBo) Curtailed in 2Q20
  • 202,815 Boepd Average Daily 2Q20 Production

2020 Full-Year Average Production of 155,000 to 165,000 Bopd & 800,000 to 820,000 Mcfpd

  • 3Q20 Average Production of 280,000 to 300,000 Boepd
  • 2020 Exit Rate Production of 310,000 to 330,000 Boepd

Forecasting Approx. $1.3 Billion Annual Cash Flow from Operations and $200 Million Annual Free Cash Flow (FCF) (Non-GAAP) in 2020 at $40 WTI

  • $615 Million Cash Flow from Operations and $500 Million FCF in 2H20

Targeting Total Debt of $5.4 Billion to $5.5 Billion by YE20

Low Cost Industry Leadership: Reinstating Original per Unit Cost Guidance

  • $3.58 Production Expense per Boe in 2Q20; in Line with Original Guidance even with Production Curtailments

On Track for Previously Revised $1.2 Billion or Lower Capital Spend in 2020

  • Est. $1.2 Billion D&C Maintenance Capital to Hold Production Flat YoY in 2021

Operating Efficiencies Continue to Drive Year-Over-Year All-In Well Costs Lower

  • Bakken Completed Well Cost Decreased 12% to $7.2 Million per Well (Approx. 70% Structural)
  • South Completed Well Cost Decreased 10% to $9.5 Million per Well (Approx. 80% Structural)

Q2 2020 Summary

The Company reported a net loss of $239.3 million, or $0.66 per diluted share, for the quarter ended June 30, 2020. In second quarter 2020, typically excluded items in aggregate represented a decrease of $16.4 million, or $0.05 per diluted share, in Continental's reported net loss. Adjusted net loss for second quarter 2020 was $255.7 million, or $0.71 per diluted share (non-GAAP).

Adjusted net loss, adjusted net loss per share, EBITDAX, net debt, free cash flow, 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: "Continental has proactively responded to the unprecedented events that have shaped the global commodity landscape in 2020. By deferring volumes in the second quarter of 2020, we expect to generate an estimated $90 million in incremental cash flow from operations at $40 WTI. Combined with our strong asset position and unmatched shareholder alignment, we believe Continental's equity reflects an uncommon value."

Production Update

Second quarter 2020 total production averaged 202,815 Boepd. Second quarter 2020 oil production averaged 95,174 Bopd. Second quarter 2020 natural gas production averaged 645.8 MMcfpd. During the second quarter, approximately 55% of the Company's operated oil volumes were shut in, or approximately 7.8 MMBo.

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

Financial Update

"We have made tremendous strides to remain the low cost industry leader amongst our oil-weighted peers. We are reinstituting per unit cost guidance and expect LOE, G&A and DD&A per Boe to be within our previous guidance, reflecting exceptional cost management and capital efficiency," said John Hart, Chief Financial Officer. "While our debt increased modestly due to the pandemic, it has not changed our long-term strategy to continue focusing on debt reduction, with a total debt target of $5.4 billion to $5.5 billion by year end 2020."

Guidance Update

COO Jack Stark commented: "Our updated 2020 guidance emphasizes our ongoing commitment to shareholder value. This is driven by the strength of our assets, the quality and flexibility of our operations and the outstanding performance by our teams, companywide. Going forward, shareholder value remains our top priority as we continue to drive down costs, maximize free cash flow and focus on reducing debt."

The Company has updated its 2020 annual production guidance to 155,000 to 165,000 Bopd and 800 to 820 MMcfpd. The Company has updated its third quarter 2020 production guidance to 280,000 to 300,000 Boepd and its 2020 exit rate production guidance to 310,000 to 330,000 Boepd. As of June 30, 2020, the Company has 215 wells in progress and expects to end the year with 140. The Company expects to average 7.7 drilling rigs and 2.5 stimulation crews in 2020.

Revised production guidance is forecasted to generate approximately $1.3 billion of annual cash flow from operations and $200 million of annual free cash flow at $40 per barrel WTI, with $615 million of cash flow from operations and $500 million of free cash flow in the second half of 2020. The Company believes it is essential to prioritize the balance sheet and is targeting total debt of $5.4 billion to $5.5 billion by year end 2020.

The Company maintains its commitment to low cost industry leadership amongst oil-weighted peers. In spite of significant production curtailments in the second quarter of 2020, the Company is reinstating previously suspended per unit cost guidance metrics in 2020. Production expense is expected to be $3.50 to $4.00 per Boe in 2020. Total G&A expense, which is comprised of cash and non-cash G&A expense, is expected to be $1.60 to $2.00 per Boe in 2020. Continental expects 2020 guidance for DD&A of $15.00 to $17.00 per Boe, reflecting strong well productivity and capital efficiency.

The Company is on track to achieve its previously revised 2020 Capex guidance of $1.2 billion or lower, a 55% decrease from original guidance of $2.65 billion. The Company continues to drive maintenance capital lower and estimates $1.2 billion D&C maintenance capital or lower to hold production flat year-over-year in 2021.

Bakken completed well cost has decreased 12% year-over-year to $7.2 million per well, with approximately 70% of these savings being structural and South completed well cost has decreased 10% year-over-year to $9.5 million per well, with approximately 80% of these savings being structural. Both the Bakken and South completed well costs include D&C and full facilities costs, including artificial lift.

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