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Press release from PR Newswire

Continental Resources Increases Production 20 Percent in Third Quarter of 2010, Compared With Third Quarter 2009

Wednesday, November 03, 2010

Continental Resources Increases Production 20 Percent in Third Quarter of 2010, Compared With Third Quarter 200916:55 EDT Wednesday, November 03, 2010Third Quarter Daily Production Seven Percent Higher Than Second Quarter 2010 EBITDAX Increases 53 Percent Over Third Quarter 2009 Company Plans to Spud First Long-Lateral Niobrara Shale Well Next MonthENID, Okla., Nov. 3, 2010 /PRNewswire-FirstCall/ -- Continental Resources, Inc. (NYSE: CLR) reported strong growth in crude oil and natural gas production and strong year-over-year EBITDAX growth for the three months ended September 30, 2010.(Logo:  http://photos.prnewswire.com/prnh/20080505/LAM014LOGO)(Logo:  http://www.newscom.com/cgi-bin/prnh/20080505/LAM014LOGO)Production was 44,775 barrels of oil equivalent per day (Boepd) for the third quarter of 2010, a 20 percent increase over production of 37,384 Boepd for the third quarter of 2009 and seven percent higher than daily production for the second quarter of 2010. Crude oil accounted for 75 percent of third quarter 2010 production.Continental's production increased to 47,336 Boepd in September 2010, the final month in the third quarter.Continental reported net income of $39.1 million, or $0.23 per diluted share, for the third quarter of 2010. Net income included a pre-tax property impairment charge of $14.7 million and a $24.2 million loss on mark-to-market derivative instruments. The loss on derivative instruments was comprised of a $36.6 million unrealized loss, offset partially by a $12.4 million realized gain. The third quarter 2010 impairment charge and $36.6 million unrealized loss together reduced net income per share by $0.19.Net income for the third quarter of 2009 was $34.9 million, or $0.21 per diluted share. Net income for the third quarter of 2009 included an impairments charge of $11.8 million and a $2.1 million unrealized loss on mark-to-market derivative instruments.  Oil and natural gas sales were $238.8 million for the third quarter of 2010, compared with $168.4 million for the same period last year.Continental reported EBITDAX of $196.9 million for the third quarter of 2010, a 53 percent increase over EBITDAX of $128.7 million for the third quarter of 2009. For the Company's definition and reconciliation of EBITDAX to net income, see "Non-GAAP Financial Measures" at the end of this press release. "Strong production growth has us firmly on track for a solid 2010 and an even stronger year in 2011," said Harold Hamm, Chairman and Chief Executive Officer. "Our teams continue to operate at a very high level, and we have the liquids-rich inventory in hand to support years of continued growth."Continental's average realized crude oil price was $67.26 per barrel in the third quarter of 2010, while the average realized natural gas price was $4.28 per Mcf, yielding a blended realized price of $56.92 per Boe. In the third quarter of 2009, the Company reported a blended price of $48.19 per Boe. The Company's crude oil price differential for the third quarter of 2010 averaged $8.93 per barrel. The Company's natural gas differential was $0.08 per Mcf for the third quarter of 2010.Production expense was $5.92 per Boe for the third quarter of 2010, compared with $6.50 per Boe for the third quarter of 2009. General and administrative expense was $2.90 per Boe, compared with $2.88 per Boe for the third quarter of 2009. These included non-cash equity compensation of $0.63 per Boe for the third quarter of 2010 and $0.92 per Boe for the third quarter of 2009.At September 30, 2010, the Company's balance sheet included $149.5 million in cash and $895.9 million in long-term debt. At the end of the third quarter of 2010, the Company had no borrowings under its revolving credit facility. Operating HighlightsThree months ended Sept. 30,Nine months ended Sept. 30,2010200920102009Average daily production:Crude oil (Bopd)33,43227,55231,40427,265Natural gas (Mcfd)68,05758,99561,94859,503Crude oil equivalents (Boepd)44,77537,38441,72837,182Average prices: (1)Crude oil ($/Bbl)$67.26$58.78$68.92$49.81Natural gas ($/Mcf)4.282.984.632.86Crude oil equivalents ($/Boe)56.9248.1958.8240.92Production expense ($/Boe) (1)5.926.506.086.95General and admin. exp. ($/Boe) (1)2.902.883.092.98EBITDAX (in thousands)196,917128,655589,962292,578Net income (in thousands) 39,07734,929213,28321,824Diluted net income per share0.230.211.260.131) Average prices and per-unit expenses are calculated based on sales volumes. Crude oil sales exceeded production volumes in the third quarter of 2010 by 78 MBbls. Crude oil sales exceeded production volumes in the third quarter of 2009 by 55 MBbls. Crude oil sales exceeded production volumes in the first nine months of 2010 by 90 MBbls. Crude oil production exceeded sales volumes in the first nine months of 2009 by 196 MBbls.Production by Region3Q2Q3QBoe per day201020102009North Region:Red River Units 14,95315,08014,917Montana Bakken5,0985,1965,986North Dakota Bakken15,06213,0467,436South Region:Arkoma Woodford 4,4133,7214,260Anadarko Woodford1,3771,079294Other 2,6402,6173,012East Region1,2321,1741,479Total44,77541,91337,384Bakken Shale Play (North Dakota and Montana)Continental's Bakken Shale production of 20,160 Boepd represented 45 percent of the Company's total production for the third quarter of 2010, compared with 36 percent in the third quarter last year. Bakken production for the third quarter of 2010 was 50 percent higher than that for the third quarter of 2009.In the North Dakota Bakken, Continental reported a 103 percent increase in production, compared to the third quarter of 2009. The Company participated in completing 53 gross wells (19.3 net) in the North Dakota Bakken during the quarter. Initial production rates averaged 1,017 Boepd during single-day test periods. All initial well results in this press release are 24-hour tests.In terms of Company-operated wells, Continental completed 26 gross operated wells (16.4 net) during the quarter, with an average 1,011 Boepd. Continental's operated wells included its first ECO-Pad® project completion. The ECO-Pad design involves drilling, from a single pad, four wells on two adjoining 1,280-acre spacing units. Expected benefits from the innovative approach include higher production from longer horizontal bores, more efficient drilling and completion, and reduced environmental impact due to the smaller surface footprint, compared with four individual drilling sites. The Company's first ECO-Pad project involved the Hegler 1-13H and 2-13H wells (both 83% WI) and the Arthur 1-12H and 2-12H wells (both 94% WI). Of the two wells that targeted the Three Forks zone, the Hegler 1-13H produced 1,195 Boe at 1,400 psi on a 22 choke, and the Arthur 1-12H produced 849 Boe at 1,150 psi on a 22 choke. In terms of the Middle Bakken wells, the Hegler 2-13H produced 1,203 Boe at 2,200 psi on an 18 choke, and the Arthur 2-12H produced 1,103 Boe at 2,350 psi on an 18 choke."The different flowing pressures clearly demonstrate that the Middle Bakken and Three Forks reservoirs are separate and not communicating in this part of western Dunn County," Mr. Hamm said. The Company has 20 operated rigs in the North Dakota Bakken and two rigs in the Montana Bakken.The Company has 864,559 net acres leased in the Bakken Shale play, with 620,620 net acres in North Dakota and 243,939 net acres in Montana portion.Red River Units (Montana, North Dakota and South Dakota)Red River Units' production was 14,953 Boepd in the third quarter, or 33 percent of total production. Continental has two operated drilling rigs in the Units and is drilling wells to complete its increased density sweep pattern in the secondary recovery program. The Company also continues to convert producer wells to injection wells.Woodford Shale Play (Oklahoma)Production in the Anadarko Woodford shale play in western Oklahoma was 1,377 Boepd in the third quarter of 2010, reflecting a significant increase in drilling activity this year. During the quarter, Continental completed a key confirmation well in the southeastern part of the play, the Dana 1-29H (78% WI) in Grady County. The Dana flowed at 2.5 MMcfd of liquids-rich natural gas and 88 Bopd in its initial one-day test period, by far the most productive well completed in the southeast extension of the play."The Southeast Cana clearly has an even higher liquids component than the core and the northwest," Mr. Hamm said. "We are very bullish on the southeastern part of the play, especially as we continue to improve the productivity of wells in the area." The Company expects to have additional data in early 2011 on another confirmation well in the Southeast Cana. The Company has leased 258,816 net acres in the Anadarko Woodford. Continental currently has six operated rigs in the Anadarko Woodford play and plans to add two more by year end.Continental's production in the eastern part of the Woodford Shale play, the Arkoma Woodford, was 4,413 Boepd in the third quarter of 2010. The Company currently has one operated rig in the Arkoma Woodford, where its acreage position totals 47,201 net acres.Niobrara Shale Play (Colorado and Wyoming)Continental today announced plans to spud its first long-lateral Niobrara shale well ? the Newton 1-9H (87% WI) ? in early December 2010 in northern Weld County, Colorado. The Newton 1-9H is the first Niobrara well permitted for 1,280-acre spacing in the Colorado portion of the play. The Company is planning to drill a 9,200-foot lateral section in the well, similar to the well design approach it is using in the North Dakota Bakken Shale play. The Company is in the process of permitting additional Niobrara wells in northern Colorado and southern Wyoming. "If the results of the Newton 1-9H go as planned, we expect to spud additional Niobrara wells early in the second quarter next year," Mr. Hamm said.Continental has 73,009 net acres leased in the Niobrara Shale play, with acreage in Weld County, Colorado and Platte, Laramie and Goshen counties, Wyoming. Conference Call InformationContinental Resources will host a conference call on Thursday, November 4, 2010, at 10:00 a.m. ET (9 a.m. CT) to discuss its third quarter 2010 results. Interested parties may listen to the conference call via the Company's website at http://www.contres.com or by phone:Dial in:(888) 713-4216Intl. dial-in:(617) 213-4868Pass code:60117799Replay number:(888) 286-8010Intl. replay:(617) 801-6888Pass code:59215224Conference PresentationsContinental management is currently scheduled to present at the following research conferences:Nov. 12Bank of America Energy Conference, MiamiNov. 17-18Bank of America High Yield Conference, New YorkNov. 30JP Morgan Oil & Gas Conference, BostonDec. 1Jefferies &. Co. Energy Summit, HoustonDec. 7Raymond James Fall Investor Conference, BostonDec. 8 Wells Fargo Energy Symposium, New York Dec. 8Capital One Southcoast 5th Annual Energy Conference, New OrleansPresentation materials will be available on the Company's web site on the day of each presentation.Continental Resources is a crude-oil concentrated, independent oil and natural gas exploration and production company. The Company focuses its operations in large new and developing plays where horizontal drilling, advanced fracture stimulation and enhanced recovery technologies provide the means to economically develop and produce oil and natural gas reserves from unconventional formations. Forward-Looking StatementsThis press release includes forward-looking information that is subject to a number of risks and uncertainties, many of which are beyond the Company's control. All information, other than historical facts included in this press release, regarding strategy, future operations, drilling plans, estimated reserves, future production, estimated capital expenditures, projected costs, the potential of drilling prospects and other plans and objectives of management are forward-looking information. All forward-looking statements speak only as of the date of this press release. Although the Company believes that the plans, intentions and expectations reflected in or suggested by the forward-looking statements are reasonable, there is no assurance that these plans, intentions or expectations will be achieved. Actual results may differ materially from those anticipated due to many factors, including oil and natural gas prices, industry conditions, drilling results, uncertainties in estimating reserves, uncertainties in estimating future production from enhanced recovery operations, availability of drilling rigs and other services, availability of crude oil and natural gas transportation capacity, availability of capital resources and other factors listed in reports we have filed or may file with the Securities and Exchange Commission. The Company undertakes no obligation to publicly update any forward-looking statement to reflect events or circumstances that may arise after the date of this press release.Contact:Investor Relations Media Warren Henry, VP Investor RelationsBrian Engel, VP Public Affairs(580) 548-5127 (580) 249-4731Unaudited Condensed Consolidated Statements of IncomeThree MonthsNine MonthsEnded September 30,Ended September 30,In thousands, except per share data2010200920102009Revenues:Oil and natural gas sales$238,826$168,372$675,376$407,379Gain (loss) on mark-to-market derivative instruments(24,183)(2,105)57,626(1,215)Oil and natural gas service operations4,8073,93714,68412,409Total revenues219,450170,204747,686418,573Operating costs and expenses:Production expenses24,85722,71969,80669,183Production taxes and other expenses19,51712,37853,75530,829Exploration expenses3,5301,0777,5859,726Oil and natural gas service operations4,9352,32612,9827,423Depreciation, depletion, amortization and accretion62,91851,030174,327154,875Property impairments14,69811,79149,38770,491General and administrative expenses (1)12,14810,04935,49129,684(Gain) loss on sale of assets491(452)(32,855)(673)Total operating costs and expenses143,094110,918370,478371,538Income from operations76,35659,286377,20847,035Other income (expense):Interest expense(12,612)(4,763)(32,875)(14,073)Other 2371941,021642(12,375)(4,569)(31,854)(13,431)Income before income taxes63,98154,717345,35433,604Provision for income taxes24,90419,788132,07111,780Net income$39,077$34,929$213,283$21,824Basic net income per share$0.23$0.21$1.26$0.13Diluted net income per share$0.23$0.21$1.26$0.13Basic weighted average shares outstanding168,925168,516168,889168,492Diluted weighted average shares outstanding169,949169,706169,904169,399(1)  Includes non-cash charges for stock-based compensation of $2.6 million and $3.2 million for the three months ended September 30, 2010 and 2009, respectively, and $8.6 million for both the nine months ended September 30, 2010 and 2009.Condensed Consolidated Balance SheetsSeptember 30December 31(in thousands)20102009(unaudited)Assets:Cash and cash equivalents$149,477$14,222Receivables376,328183,358Derivative assets39,5112,218Inventories, prepaid expenses and other37,36636,230Net property and equipment2,703,8672,068,055Debt issuance costs, net28,07610,844Total assets$3,334,625$2,314,927Liabilities and shareholders' equity:Current liabilities$527,306$219,710Long-term debt895,917523,524Other noncurrent liabilities662,651541,414Shareholders' equity1,248,7511,030,279Total liabilities and shareholders' equity$3,334,625$2,314,927Unaudited Condensed Consolidated Statements of Cash FlowsNine months ended September 30,(in thousands)20102009Net income $213,283$21,824Adjustments to reconcile net income to net cash provided by operating activities:Non-cash expenses292,026255,831Changes in assets and liabilities(9,969)(61,660)Net cash provided by operating activities495,340215,995Net cash used in investing activities(708,953)(375,421)Net cash provided by financing activities348,868159,492Net change in cash and cash equivalents135,25566Cash and cash equivalents at beginning of period14,2225,229Cash and cash equivalents at end of period$149,477$5,295Non-GAAP Financial MeasuresEBITDAX represents earnings before interest expense, income taxes, depreciation, depletion, amortization and accretion, property impairments, exploration expenses, unrealized derivative gains and losses, and non-cash equity compensation expense. EBITDAX is not a measure of net income or cash flows as determined by U.S. GAAP. Management believes EBITDAX is useful because it allows them to more effectively evaluate the Company's operating performance and compare the results of the Company's operations from period to period without regard to the Company's financing methods or capital structure. We exclude the items listed above from net income in arriving at EBITDAX because these amounts can vary substantially from company to company within the 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 or cash flows 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. The Company's computations of EBITDAX may not be comparable to other similarly titled measures of other companies. We believe that 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. Our revolving credit facility requires that we maintain a total debt to EBITDAX ratio of no greater than 3.75 to 1.0 on a rolling four-quarter basis. The revolving credit facility defines EBITDAX consistently with the definition of EBITDAX utilized and presented by the Company. The following table is a reconciliation of our net income to EBITDAX.Three monthsNine monthsended September 30,ended September 30,in thousands2010200920102009Net income $39,077$34,929$213,283$21,824Interest expense12,6124,76332,87514,073Provision for income taxes24,90419,788132,07111,780Depreciation, depletion, amortization and accretion62,91851,030174,327154,875Property impairments14,69811,79149,38770,491Exploration expenses3,5301,0777,5859,726Unrealized derivative (gain) loss36,5522,105(28,162)1,215Non-cash equity compensation2,6263,1728,5968,594EBITDAX$196,917$128,655$589,962$292,578SOURCE Continental ResourcesFor further information: Investor Relations, Warren Henry, VP Investor Relations, +1-580-548-5127, or Media, Brian Engel, VP Public Affairs, +1-580-249-4731, both of Continental Resources