President Announces Plans to Retire October 31, 2008 ENID, Okla., July 29
ENID, Okla., July 29 /PRNewswire-FirstCall/ -- Continental Resources, Inc.
(NYSE: CLR) reported strong growth in oil and gas sales and earnings for the
three months ended June 30, 2008, generating record financial results. Based
on its strong cash flows, the Company is planning to expand the number of
drilling rigs that it will deploy in the second half of the year, positioning
the Company for accelerated growth in late 2008.
(Logo: http://www.newscom.com/cgi-bin/prnh/20070501/DATU029LOGO)
The Company reported net income of $127.3 million, or $0.75 per diluted
share, for the second quarter of 2008. This represents a 188 percent increase
over pro forma net income of $44.2 million, or $0.27 per share, for the second
quarter of 2007. This comparison includes pro forma adjustments to provide for
income taxes as if the Company had been a subchapter C corporation in the
second quarter last year and to eliminate a $198.4 million charge in
connection with the conversion from a subchapter S to a subchapter C
corporation at the time of its initial public offering of stock in May 2007.
The Company's reported net loss in last year's second quarter was $142.5
million, or $0.87 per share.
Total revenues for the second quarter of 2008 were $303.4 million, an
increase of 109 percent over total revenues of $145.3 million for the second
quarter of 2007.
Oil and natural gas sales were $297.6 million for the second quarter of
2008, an increase of 113 percent over oil and gas sales for the second quarter
last year. The Company's average sales price per barrel of crude oil
equivalent was $102.86 for the most recent quarter, compared with $54.44 for
the second quarter last year.
EBITDAX for the second quarter of 2008 was $245.0 million, an increase of
125 percent over EBITDAX of $108.7 million for the second quarter of 2007. For
the Company's definition and reconciliation of EBITDAX to GAAP measures, see
"Non-GAAP Financial Measures" at the end of this press release.
"Strong operating results and high commodity prices resulted in record
financial results for the second quarter," said Harold Hamm, Chairman and
Chief Executive Officer. "Our cash flow outlook continues to strengthen, and
consequently we plan to exit 2008 with approximately 35 operated drilling
rigs, rather than the target of 30 that we projected three months ago." The
Company currently has 26 operated drilling rigs, up from 13 as of January 1,
2008.
Operations Update
The following table contains financial and operational highlights for the
three and six months ended June 30, 2008 compared to the same periods in 2007.
Three months ended Six months ended
June 30, June 30,
2008 2007 2008 2007
Average daily
production:
Crude oil (bopd) 24,117 23,674 24,080 23,391
Natural gas (Mcfd)45,035 29,618 41,098 29,229
Crude oil equivalent
(boepd) 31,623 28,610 30,930 28,262
Average prices: (1)
Crude oil ($ / bbl) $118.28 $58.25 $104.43 $53.44
Natural gas
($ / Mcf) 8.82 6.07 8.25 6.11
Crude oil equivalent
($ / boe)102.8654.4492.3450.52
Production expense
($ / boe) (1)9.32 8.42 8.83 7.43
EBITDAX
($ in thousands) $244,950 $108,659 $426,738 $199,655
Net income
($ in thousands) (2) 127,307 44,200 215,278 77,565
Diluted net
income per share 0.75 0.27 1.27 0.48
(1) Crude oil sales exceeded production in the second quarter and first
half of 2008 by 16 MBbls and 35 MBbls, respectively. Crude oil
production volumes exceeded oil sales in the second quarter and first
half of 2007 by 31 MBbls and 47 MBbls, respectively.
(2) Second quarter and first half 2007 net income and diluted net income
per share are after pro forma adjustments (i) to provide for income
taxes as if the Company had been a subchapter C corporation prior to
the completion of its initial public offering and (ii) to eliminate
the $198.4 million charge recorded to recognize deferred taxes upon
its conversion from a nontaxable subchapter S corporation to a taxable
subchapter C corporation in conjunction with the Company's May 2007
initial public offering.
During the second quarter, Continental continued to expand its undeveloped
acreage positions in the Bakken, Anadarko Woodford, Atoka, Rhinestreet,
Marcellus, Huron and Haynesville shale plays. The Company has added
approximately 325,000 net acres to its lease holdings since the beginning of
2008, increasing its acreage position to almost one million acres in U.S.
shale resource plays.
"We continue to see opportunities to add significant additional acreage in
these plays," Mr. Hamm said. "We are planning to ask our board of directors
for a second increase in the 2008 lease acquisition budget that would raise it
by $100 million, bringing the total 2008 land budget to approximately $178
million."
Continental's production averaged 31,623 boepd for the second quarter of
2008, an increase of five percent over the first quarter of 2008 and 11
percent over the second quarter of 2007. June 2008 production averaged just
over 33,000 boepd, showing significant acceleration of production within the
second quarter.
The following table presents average daily production for the Company's
principal operating areas for the three months ended June 30, 2008 compared to
the three months ended March 31, 2008 and June 30, 2007.
(boe per day) Q2 2008 Q1 2008 Q2 2007
Red River Units (1) 13,551 13,62012,615
Montana Bakken6,363 6,678 7,890
North Dakota Bakken 2,082 1,532 924
Other Rockies (1) 2,484 2,060 1,839
Oklahoma Woodford 2,125 1,900 586
Other Mid-Continent 4,419 3,831 4,320
Gulf Coast 599 616 436
Total31,623 30,23728,610
(1) Daily production of 65 boe in the second quarter of 2007 has been
reclassified from the Red River Units to Other Rockies to conform to
the current period presentation.
Red River Units
Continental continued to implement its increased density drilling and
secondary recovery programs in the Red River Units during the second quarter
of 2008, drilling new infield production wells and converting producing wells
to water-injectors. During the quarter, the Company determined that additional
water source wells were needed to achieve the planned water volume injection
rate in the Units. The delay related to the drilling of the additional water
source wells is expected to move the Company's previously announced peak
production target for the Units of 21,000 net boepd to late 2009.
Second quarter production in the Red River Units was also negatively
affected by a late winter storm that struck South Dakota in the first week of
May, cutting electrical power to significant parts of the Units for most of
that month. Continental estimates that the power outage reduced production in
the Units and in the "Other Rockies" segment by an aggregate of approximately
500 barrels per day for the quarter.
Bakken Shale
In the second quarter of 2008, Continental increased its lease acreage
position in the Bakken Shale play to approximately 525,000 net acres, with
153,000 net acres in Montana and 372,000 net acres in North Dakota.
In the Montana Bakken, drilling and production results have been
consistent with expectations of approximately 300,000 gross barrels of
reserves per well from Continental's 320-acre infield and 640-acre
tri-lateral, field-extension program. Reduced second quarter production in the
field reflected a combination of normal production declines and interrupted
production in wells that were shut in while adjacent, new infield wells were
being fracture-stimulated.
Notable second quarter well completions in Richland County in the Montana
Bakken included the LeaJoe 1-1H (63% WI), Swenseid 3-9H (95% WI) and the
Constance 3-7H (73% WI). The wells had average seven-day initial production
rates of 609, 336 and 315 gross boepd, respectively.
In the North Dakota Bakken, average seven-day initial production rates
continued to improve in the second quarter of 2008, with wells averaging 513
boepd, an increase of 13 percent over initial daily production for wells
completed in the first quarter this year.
"These improved production rates and increased consistency show the
significant advances we've made in our completion techniques," Mr. Hamm said.
"We've gained valuable experience in the play over the past 18 months. We are
now fracture stimulating wells in 10 segments and plan to test the impact of
12 or more segments. "
Recent notable completions in the North Dakota Bakken are shown below with
average seven-day initial gross production rates:
-- Mathistad 1-35H (40% WI) in McKenzie Co. -- 1,260 boepd;
-- Dodge 1-17H (20% WI) McKenzie Co. -- 989 boepd;
-- Whitman 11-34H (32% WI) in Dunn Co. -- 765 boepd;
-- Bice 1-29H (44% WI) in Dunn Co. -- 693 boepd;
-- Cleo 1-12H (26% WI) McKenzie Co. -- 654 boepd;
-- Carson Peak 44-2H (33% WI) in Dunn Co. -- 601 boepd;
-- Kermit 1-32H (45% WI) McKenzie Co. -- 596 boepd;
-- Bridger 44-14H (45% WI) in Dunn Co. -- 383 boepd;
-- Bonneville 31-23H (45% WI) in Dunn Co. -- 362 boepd;
-- Mountain Gap 31-10H (44% WI) in Dunn Co. -- 331 boepd.
Eight of the 10 wells listed above were completed in the Middle Bakken
formation, which has typically been the drilling target in the North Dakota
Bakken play. The Bice 1-29H and Mathistad 1-35H were Continental's first two
wells to be targeted for the Three Forks/Sanish (TFS) formation, which is
typically found 50-to-100 feet beneath the base of the Upper Bakken. Since the
Bice 1-29H completion in late May, Continental has adjusted most of its
drilling program to target specifically the TFS and determine its potential to
add incremental reserves to the play.
The Company has drilled to total depth seven other TFS wells in North
Dakota, all of which should be completed by mid-September. Continental also
plans to drill its first TFS test well in the Montana Bakken later this year.
Continental currently has 12 operated drilling rigs in the Bakken Shale
play, with four in Montana and eight in North Dakota. By year-end, the Company
plans to have three operated drilling rigs in the Montana Bakken and 13 in
North Dakota.
Other Rockies
In Richland County, Montana, just north of the main Bakken fairway,
Continental recently completed its second successful vertical well in the Red
River formation. The Smart 1-23H (89% WI) had an average seven-day initial
production rate of 442 gross boepd. The Company plans to start drilling its
next Red River test well in August and has identified 19 gross (11 net)
prospective Red River locations on 88 square miles of 3D seismic that it has
interpreted. Continental is currently processing an additional 128 square
miles of 3D seismic data to identify additional Red River opportunities.
The Company noted that early results from the initial two Red River B test
wells drilled this year in one localized area of the Haley prospect in South
Dakota have been disappointing, with higher than expected volumes of water
production. Efforts to isolate the water source and to increase oil production
are underway. Continental remains optimistic about the play and is currently
testing its third well and drilling a fourth in the Haley prospect.
During the second quarter, the Company drilled two vertical wells in its
East Lustre prospect. The wells penetrated Lodgepole reef mounds, as expected,
but encountered low rock porosity and were plugged after open-hole log
evaluation.
Arkoma Woodford
Continental's drilling program in the Arkoma Woodford Shale play in
southeastern Oklahoma continued to have good results in the second quarter of
2008. During the quarter, the Company completed a two-well simultaneous
fracture stimulation involving the Arlan 2-15H (21% WI) and 3-15H (21% WI) in
Hughes Co., OK. The two wells' average seven-day initial production rates were
6.2 gross MMcfd and 7.2 gross MMcfd of natural gas, significantly above
average production rates for most of the Company's other wells in the play.
After separately being fracture stimulated, the Arlan 4-15H (21% WI) averaged
7.1 gross MMcfd of natural gas during its seven-day initial production period.
During the third quarter, the Company plans to perform four separate two-well
simultaneous fracture stimulation completions in the same general area.
In addition, the Company acquired 18 square miles of 3D seismic in the
Salt Creek prospect during the second quarter of 2008 and is currently
acquiring an additional eight square miles of 3D seismic in this part of the
play. In its East McAlester prospect of the Woodford, Continental expects to
acquire 55 square miles of 3D seismic within the next six months. Continental
uses seismic data to attempt to identify and avoid faults and other geological
features that could reduce the productivity of its Woodford wells.
Continental's lease position in the Arkoma Woodford is approximately
46,000 acres. The Company has five operated drilling rigs in the Arkoma
Woodford Shale play and expects to increase to seven by year-end.
Morrow-Springer
Early in the second quarter of 2008, the Company completed the Marriott
1-18 (63% WI) in Blaine County, OK, with an average seven-day initial
production rate of 2.5 gross MMcfd and 45 bpd of condensate from the Springer
Britt sand. Subsequently, Continental completed the Wolsey 2-9 (85% WI) in
Blaine County, with an average seven-day initial production rate of 5.6 gross
MMcfd of natural gas and 142 gross bpd of condensate.
Continental owns approximately 20,000 net acres that is prospective for
the Morrow-Springer sands in the Watonga-Chickasha Trend. The Company plans to
keep one drilling rig active in Blaine County through year-end.
Atoka Shale
The Company's initial well in the Atoka Shale play, the Shrewder 1-22H
(100% WI) in Ellis County, OK, is currently drilling in the horizontal
lateral. The Company has a lease position of approximately 32,000 net acres in
the prospective Atoka fairway.
Anadarko Woodford Shale
The Company has a lease position of approximately 94,000 net acres in the
Anadarko Woodford Shale, and is planning to drill an initial test well in the
play in the third quarter of 2008.
Trenton/Black River
Continental completed four operated wells in the Trenton/Black River play
in southern Michigan during the second quarter of 2008. The Boardman 1-1 and
Wessel 2-6A (each 83% WI) in Hillsdale County are currently testing at rates
of 150 and 110 gross barrels of crude oil per day, respectively, with plans to
increase the rates to 200 bopd over the next several weeks. Initial testing of
the Lindemann 1-36 (75% WI) has been encouraging. The Wessel 1-1 (83% WI) has
been temporarily abandoned.
The Company has a lease position of approximately 48,000 net acres in the
play. Continental has acquired 3D seismic covering approximately 15 percent of
its acreage and plans to acquire an additional 25 square miles of 3D seismic
by year-end. The Company plans to drill additional wells in the Trenton/Black
River play by year-end.
Additional Shale Resource Plays
The Company has grown its land positions to approximately 17,000 net acres
in the Haynesville Shale play in northern Louisiana and approximately 88,000
net acres in the Rhinestreet, Marcellus and Huron Shale plays in West
Virginia, Ohio, Pennsylvania and New York.
Continental is currently drilling the first of four wells planned to test
the Rhinestreet and Lower Huron shales in Gallia County, OH.
"We share the industry's enthusiasm for these shale plays and plan to
commence drilling by year-end in the Haynesville," Mr. Hamm said.
President Announces Plans to Retire
Continental also announced that President and Chief Operating Officer Mark
Monroe will retire effective October 31, 2008. Mr. Monroe joined the Company
in his present positions in October 2005, but has served on the Company's
Board of Directors since 2001 and plans to continue in that role. Jeff Hume,
Senior Vice President of Operations, will be promoted to Chief Operating
Officer, and Mr. Hamm will assume the President position.
"I joined Continental's management team in 2005 primarily to assist the
Company in its transition from a private to a public company," Mr. Monroe
said. "With the completion of the initial public offering in May 2007, the
Company's subsequent achievements, and the hiring of several key employees
over the past three years, the Company is well positioned to continue its
success without my full-time involvement."
Mr. Hamm commented, "Though I will miss my daily interactions with Mark,
he will continue to be available for advice and counsel. We have an excellent
management team in place to lead the Company forward."
Conference Call Information
Continental Resources will host a conference call on Tuesday, July 29,
2008, at 10:00 a.m. ET (9 a.m. CT) to discuss its second quarter 2008 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) 680-0878
Intl. dial in: (617) 213-4855
Pass code: 94076373
Replay number: (888) 286-8010
Intl. replay: (617) 801-6888
Pass code: 89826064
Conference Presentations
Continental management is currently scheduled to present at the Enercom
2008 Oil & Gas Conference in Denver on Monday, August 11; at the 2008 Lehman
Brothers Energy Conference in New York on Thursday, September 4; and at the
John S. Herold 17th Annual Pacesetters Energy Conference in Old Greenwich,
Connecticut on Wednesday, September 24. Presentations and audio links will be
posted on the Company's web site.
Continental Resources is a crude-oil concentrated, independent oil and
natural gas exploration and production company with operations in the Rocky
Mountain, Mid-Continent and Gulf Coast regions of the United States. The
Company focuses its operations in large new and developing resource 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.
This 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.
CONTACT: Continental Resources, Inc.
J. Warren Henry Brian Engel
InvestorsMedia
(580) 548-5127 (580) 249-4731
Condensed Consolidated
Income StatementsThree months endedSix months ended
(in thousands, June 30,June 30,
except per share 20082007 20082007
amounts)(unaudited) (unaudited)
Revenues:
Oil and natural
gas sales $297,619$140,046 $523,044$256,030
Loss on
mark-to-market
derivative
instruments (3,358) - (7,966) -
Oil and natural
gas service
operations 9,173 5,280 16,007 10,419
Total revenues303,434 145,326 531,085 266,449
Operating costs
and expenses:
Production expenses 26,953 21,655 50,026 37,640
Production tax 17,695 7,437 30,470 13,600
Exploration expense 5,731 1,602 10,993 3,906
Oil and natural gas
service operations 6,468 3,134 10,698 6,353
Depreciation,
depletion,
amortization and
accretion 28,062 23,330 56,708 43,738
Property impairments 3,153 5,9237,673 8,893
General and
administrative (1) 10,276 8,450 17,807 21,423
Gain on sale of
assets(133) (339)(212) (400)
Total operating costs
and expenses 98,205 71,192 184,163 135,153
Income from operations205,229 74,134 346,922 131,296
Other income (expense):
Interest expense and
other (2,617) (2,843) (5,729) (6,191)
Income before income
taxes202,612 71,291 341,193 125,105
Provision for income
taxes 75,305 213,789 125,915 213,789
Net income (loss) 127,307(142,498) 215,278 (88,684)
Basic net income (loss)
per share 0.76 (0.87)1.28 (0.55)
Diluted net income (loss)
per share 0.75 (0.87)1.27 (0.55)
Basic weighted average
shares outstanding 168,055 162,933 167,973 160,651
Diluted weighted
average shares
outstanding 169,552 162,933 169,418 160,651
(1) Includes non-cash charges for stock-based compensation of $2.5 million
and $3.1 million for the three months ended June 30, 2008 and 2007,
respectively. Includes non-cash charges for stock-based compensation
of $3.9 million and $10.9 million for the six months ended June 30,
2008 and 2007, respectively.
Condensed Consolidated Balance Sheets June 30,December 31,
(in thousands)2008 2007
(unaudited)
Assets:
Cash and cash equivalents$13,190 $8,761
Receivables 275,765163,090
Inventories and other 32,080 33,713
Net property and equipment, based on
successful efforts method of accounting 1,492,000 1,157,926
Other assets 1,444 1,683
Total assets $1,814,479 $1,365,173
Liabilities and shareholders' equity:
Current liabilities $350,217 $266,106
Long-term debt 220,000165,000
Other noncurrent liabilities 400,867310,935
Total shareholders' equity 843,395623,132
Total liabilities and shareholders' equity$1,814,479 $1,365,173
Condensed Consolidated Statements of Cash FlowsSix months ended
June 30,
(in thousands)2008 2007
(unaudited)
Net income (loss) $215,278 $(88,684)
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Non-cash expenses140,900278,965
Changes in assets and liabilities(58,208) (26,772)
Net cash provided by operating activities297,970163,509
Net cash used in investing activities (348,729) (233,855)
Net cash provided by financing activities 55,188 69,619
Effect of exchange rate on change in cash
and cash equivalents -102
Net change in cash and cash equivalents4,429 (625)
Cash and cash equivalents at beginning of
period8,761 7,018
Cash and cash equivalents at end of period $ 13,190 $6,393
Non-GAAP Financial Measures
EBITDAX represents earnings before interest expense, income taxes,
depreciation, depletion, amortization and accretion, property impairments,
exploration expense, unrealized derivative gains or losses, and non-cash
compensation expense. EBITDAX is not a measure of net income or cash flow as
determined by generally accepted accounting principles (GAAP). EBITDAX should
not be considered as an alternative to, or more meaningful than, net income or
cash flow as determined in accordance with 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. The Company
believes that EBITDAX is a widely followed measure of operating performance
and may also be used by investors to measure its ability to meet future debt
service requirements, if any. The Company's credit facility requires that it
maintain a total debt to EBITDAX ratio of no greater than 3.75 to 1 on a
rolling four-quarter basis. The credit facility defines EBITDAX consistently
with the definition of EBITDAX utilized and presented by the Company. The
following table represents a reconciliation of the Company's net income to
EBITDAX.
Reconciliation of Net Income to EBITDAX
Three months ended Six months ended
June 30, June 30,
(in thousands) 2008 2007 2008 2007
(unaudited)(unaudited)
Net income (loss) $127,307$(142,498)$215,278 $(88,684)
Income tax expense 75,305 213,789 125,915 213,789
Interest expense 2,8653,4276,2767,080
Depreciation,
depletion,
amortization and
accretion 28,062 23,330 56,708 43,738
Property impairments 3,1535,9237,6738,893
Exploration expense 5,7311,602 10,9933,906
Equity compensation 2,5273,0863,895 10,933
EBITDAX $244,950 $108,659 $426,738 $199,655
SOURCE Continental Resources
