Continental Resources Delivers Outstanding 1Q21 Financial Results; Reinstates Dividend And Accelerates Shareholder Returns

Rhea-AI Summary

Continental Resources reported strong 1Q21 results, achieving a net income of $259.6 million or $0.72 per diluted share. The company reinstated its quarterly dividend, doubling it to $0.11 per share, payable on May 24, 2021. Projected full-year cash flow from operations is $3.1 billion, with $1.7 billion in free cash flow at $60 WTI. Debt reduction plans are on track, aiming for below $4 billion by year-end 2021. The company also projects a 12% return on capital employed for 2021.

Positive

• Reinstated quarterly dividend at $0.11 per share, doubling previous amount.
• Projected full-year cash flow from operations increased to $3.1 billion, a 30% rise from original guidance.
• Accelerating debt reduction to below $4 billion by year-end 2021.
• Achieved net cash from operating activities of $1.04 billion.

Negative

• Total debt at $4.97 billion, indicating substantial liabilities.
• Average daily production decreased to 307.9 MBoepd from 360.8 MBoepd year-over-year.
• Crude oil production averaged 151.9 MBopd, down from 200.7 MBopd year-over-year.

OKLAHOMA CITY, April 28, 2021 /PRNewswire/ --

•   Quarterly Dividend Doubled to $0.11 per Share 
   o   Payable on May 24, 2021 to Stockholders of Record on May 10, 2021
•   $260 Million Net Income & $0.72 Earnings per Share in 1Q21
•   $3.1 Billion Projected Full-Year 2021 Cash Flow from Operations & $1.7 Billion
    Projected Full-Year 2021 Free Cash Flow (Non-GAAP) at $60 WTI & $2.75 HH
•   Accelerating Projected Debt Reduction to Below $4.0 Billion by Year-End 2021
•   Projecting Approximately 12% Return on Capital Employed¹ (ROCE) in 2021

Continental Resources, Inc. (NYSE: CLR) (the "Company") today announced its first quarter 2021 operating and financial results.

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"Continental's outstanding first quarter results and accelerated shareholder returns, which includes our reinstated dividend and exceptional progress on debt reduction, underscore Continental's commitment to delivering strong cash flow generation, consistent asset performance and operational excellence," said Bill Berry, Chief Executive Officer.

The Company reported net income of $259.6 million, or $0.72 per diluted share, for the quarter ended March 31, 2021. In first quarter 2021, typically excluded items in aggregate represented $19.2 million, or $0.05 per diluted share, of Continental's reported net income. Adjusted net income for first quarter 2021 was $278.9 million, or $0.77 per diluted share (non-GAAP). Net cash provided by operating activities for first quarter 2021 was $1.04 billion and EBITDAX was $962.6 million (non-GAAP).

Adjusted net income, adjusted net income per share, EBITDAX, free cash flow, 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.

___________________________________

1 Return on capital employed represents net income attributable to the Company before non-cash gains and losses on derivatives, income taxes, non-cash equity compensation expense, interest expense, and gains and losses on extinguishment of debt, the result of which is divided by average capital employed for the year, with capital employed representing the sum of total debt and total shareholders' equity attributable to the Company.

Outstanding 1Q21 Financial Results; Reinstates Dividend & Accelerates Shareholder Returns

The Company's Board of Directors approved the reinstatement of the quarterly dividend at $0.11 per share on the Company's outstanding common stock, payable on May 24, 2021 to stockholders of record on May 10, 2021. This dividend is double the Company's previous quarterly dividend and underscores the Company's commitment to delivering strong shareholder capital returns.

The Company now projects to generate $3.1 billion of cash flow from operations and $1.7 billion of free cash flow (non-GAAP) for full-year 2021 at $60 per barrel WTI and $2.75 per Mcf Henry Hub. This is an approximately 30% increase to projected cash flow from operations versus original 2021 guidance.

Given the Company's significant annual cash flow generation, the Company is accelerating its debt reduction and projects debt below $4 billion by year end 2021. As previously announced, the Company has reduced its total debt to $4.97 billion, with a cash balance of $96 million, equating to net debt of $4.88 billion (non-GAAP) as of March 31, 2021.

The Company's second quarter 2021 to fourth quarter 2021 crude oil differentials guidance per barrel of oil is projected to average ($3.75) to ($4.75) and the Company's natural gas differentials guidance per Mcf is projected to average ($0.50) to $0.00. 

Additionally, the Company is projecting an approximately 12% ROCE in 2021.

Production & Operations Update

First quarter 2021 total production averaged 307.9 MBoepd. First quarter 2021 oil production averaged 151.9 MBopd. First quarter 2021 natural gas production averaged 936.5 MMcfpd.

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

		1Q			1Q
	Boe per day	2021			2020
	Bakken	160,577			201,502
	South	138,396			152,010
	All other	8,969			7,329
	Total	307,942			360,841

Financial Update

"Strong first quarter 2021 results underscore our commitment to capital discipline and were driven by the significant cost performance and operational efficiencies of our teams," said John Hart, Senior Vice President, Chief Financial Officer & Chief Strategy Officer.

The Company's full 2021 guidance, capital expenditures budget and operating details can be found at the conclusion of this press release.

1Q 2021 Financial Update	Three Months Ended March 31, 2021
Cash and Cash Equivalents	$96.1 million
Total Debt	$4.97 billion
Net Debt (non-GAAP)(1)	$4.88 billion
Average Net Sales Price (non-GAAP)(1)
Per Barrel of Oil	$53.09
Per Mcf of Gas	$5.56
Per Boe	$43.11
Production Expense per Boe	$3.35
Total G&A Expenses per Boe	$1.90
Crude Oil Net Sales Price Discount to NYMEX ($/Bbl)	($4.52)
Natural Gas Net Sales Price Premium to NYMEX ($/Mcf)	$2.87
Non-Acquisition Capital Expenditures attributable to CLR	$293.4 million
Exploration & Development Drilling & Completion	$255.6 million
Leasehold and minerals	$7.7 million
Workovers, Recompletions and Other	$30.1 million
Minerals attributable to FNV	$0.9 million
(1) Net debt and net sales prices 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 subsequently under the header Non-GAAP Financial Measures.

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 March 31,
		2021				2020
Average daily production:
Crude oil (Bbl per day)		151,852				200,671
Natural gas (Mcf per day)		936,540				961,022
Crude oil equivalents (Boe per day)		307,942				360,841
Average net sales prices (non-GAAP), excluding effect from derivatives: (1)
Crude oil ($/Bbl)		$	53.09			$	39.64
Natural gas ($/Mcf)		$	5.56			$	0.90
Crude oil equivalents ($/Boe)		$	43.11			$	24.44
Production expenses ($/Boe)		$	3.35			$	3.61
Production taxes (% of net crude oil and natural gas sales)		7.0%				8.9%
DD&A ($/Boe)		$	18.35			$	16.35
Total general and administrative expenses ($/Boe) (2)		$	1.90			$	1.31
Net income (loss) attributable to Continental Resources (in thousands)		$	259,642			$	(185,664)
Diluted net income (loss) per share attributable to Continental Resources		$	0.72			$	(0.51)
Adjusted net income (loss) (non-GAAP) (in thousands) (1)		$	278,890			$	(27,567)
Adjusted diluted net income (loss) per share (non-GAAP) (1)		$	0.77			$	(0.08)
Net cash provided by operating activities (in thousands)		$	1,040,260			$	663,818
EBITDAX (non-GAAP) (in thousands) (1)		$	962,636			$	594,247
(1) Net sales prices, adjusted net income (loss), adjusted diluted net income (loss) 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 subsequently under the header Non-GAAP Financial Measures.
(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 $1.29 and $0.81 for 1Q 2021 and 1Q 2020, respectively. Non-cash equity compensation expense per Boe was $0.61 and $0.50 for 1Q 2021 and 1Q 2020, respectively.

First Quarter Earnings Conference Call

The Company plans to host a conference call to discuss first quarter 2021 results on Thursday, April 29, 2021 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:	12:00 p.m. ET, Thursday, April 29, 2021
Dial-in:	1-888-317-6003
Intl. dial-in:	1-412-317-6061
Conference ID:	8019515
A replay of the call will be available for 14 days on the Company's website or by dialing:
Replay number:	1-877-344-7529
Intl. replay:	1-412-317-0088
Conference ID:	10153636

The Company plans to publish a first quarter 2021 summary presentation to its website at www.CLR.com prior to the start of its conference call on Thursday, April 29, 2021.

About Continental Resources

Continental Resources (NYSE: CLR) is a top 10 independent oil producer in the U.S. 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 has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the STACK play. The Company also has a newly acquired position in the Powder River Basin play of Wyoming. 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 2021, the Company will celebrate 54 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 effects of any national or international health crisis; 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; our ability to pay future dividends, reduce debt, or complete share repurchases; 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 and greenhouse gas emissions; 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, 2020, 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, if any, 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 Spaay
Investor Relations Analyst
405-774-5878
Lucy.Spaay@CLR.com

 

Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Operations
		Three months ended March 31,
		2021				2020
		In thousands, except per share data
	Revenues:
	Crude oil and natural gas sales	$	1,247,533			$	862,743
	Loss on derivative instruments, net	(43,507)				—
	Crude oil and natural gas service operations	11,789				18,058
	Total revenues	1,215,815				880,801
	Operating costs and expenses:
	Production expenses	93,065				118,478
	Production taxes	83,976				71,224
	Transportation expenses	50,256				60,502
	Exploration expenses	4,645				11,637
	Crude oil and natural gas service operations	4,490				5,910
	Depreciation, depletion, amortization and accretion	509,608				536,696
	Property impairments	11,436				222,529
	General and administrative expenses	52,848				42,911
	Net (gain) loss on sale of assets and other	(207)				4,502
	Total operating costs and expenses	810,117				1,074,389
	Income (loss) from operations	405,698				(193,588)
	Other income (expense):
	Interest expense	(64,951)				(63,594)
	Gain (loss) on extinguishment of debt	(196)				17,631
	Other	252				532
		(64,895)				(45,431)
	Income (loss) before income taxes	340,803				(239,019)
	(Provision) benefit for income taxes	(80,528)				52,235
	Net income (loss)	260,275				(186,784)
	Net income (loss) attributable to noncontrolling interests	633				(1,120)
	Net income (loss) attributable to Continental Resources	$	259,642			$	(185,664)
	Net income (loss) per share attributable to Continental Resources:
	Basic	$	0.72			$	(0.51)
	Diluted	$	0.72			$	(0.51)

 

Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Balance Sheets
	In thousands		March 31, 2021				December 31, 2020
	Assets
	Cash and cash equivalents		$	96,057			$	47,470
	Other current assets		965,764				805,075
	Net property and equipment (1)		13,724,418				13,737,292
	Other noncurrent assets		34,688				43,261
	Total assets		$	14,820,927			$	14,633,098
	Liabilities and equity
	Current liabilities		$	1,232,242			$	860,806
	Long-term debt, net of current portion		4,971,055				5,530,173
	Other noncurrent liabilities		1,920,424				1,819,394
	Equity attributable to Continental Resources		6,324,078				6,056,446
	Equity attributable to noncontrolling interests		373,128				366,279
	Total liabilities and equity		$	14,820,927			$	14,633,098
	(1) Balance is net of accumulated depreciation, depletion and amortization of $15.26 billion and $14.77 billion as of March 31, 2021 and December 31, 2020, respectively.

 

Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
			Three months ended March 31,
	In thousands		2021				2020
	Net income (loss)		$	260,275			$	(186,784)
	Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Non-cash expenses		633,941				721,785
	Changes in assets and liabilities		146,044				128,817
	Net cash provided by operating activities		1,040,260				663,818
	Net cash used in investing activities		(428,084)				(706,739)
	Net cash provided by (used in) financing activities		(563,589)				521,092
	Net change in cash and cash equivalents		48,587				478,171
	Cash and cash equivalents at beginning of period		47,470				39,400
	Cash and cash equivalents at end of period		$	96,057			$	517,571

Non-GAAP Financial Measures

Non-GAAP adjusted net income (loss) and adjusted net income (loss) per share attributable to Continental

Our presentation of adjusted net income (loss) and adjusted net income (loss) per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted net income (loss) and adjusted net income (loss) per share represent net income (loss) and diluted net income (loss) per share determined under U.S. GAAP without regard to non-cash gains and losses on derivative instruments, property impairments, gains and losses on asset sales, and gains and losses on extinguishment of debt 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 (loss) and adjusted net income (loss) per share should not be considered in isolation or as an alternative to, or more meaningful than, net income (loss) or diluted net income (loss) 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 (loss) and diluted net income (loss) per share as determined under U.S. GAAP to adjusted net income (loss) and adjusted diluted net income (loss) per share for the periods presented.

			Three months ended March 31,
			2021								2020
	In thousands, except per share data		$				Diluted EPS				$				Diluted EPS
	Net income (loss) attributable to Continental Resources (GAAP)		$	259,642			$	0.72			$	(185,664)			$	(0.51)
	Adjustments:
	Non-cash loss on derivatives		14,070								—
	Property impairments		11,436								222,529
	Net (gain) loss on sale of assets and other		(207)								4,502
	(Gain) loss on extinguishment of debt		196								(17,631)
	Total tax effect of adjustments (1)		(6,247)								(51,303)
	Total adjustments, net of tax		19,248				0.05				158,097				0.43
	Adjusted net income (loss) (non-GAAP)		$	278,890			$	0.77			$	(27,567)			$	(0.08)
	Weighted average diluted shares outstanding		362,673								365,403
	Adjusted diluted net income (loss) per share (non-GAAP)		$	0.77							$	(0.08)
	(1) Computed by applying a combined federal and state statutory tax rate of 24.5% in effect for 2021 and 2020 to the pre-tax amount of adjustments associated with our operations in the United States.

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 March 31, 2021, the Company's total debt was $4.97 billion and its net debt amounted to $4.88 billion, representing total debt of $4.97 billion less cash and cash equivalents of $96.1 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 gains 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 (loss) to EBITDAX for the periods presented.

			Three months ended March 31,
	In thousands		2021				2020
	Net income (loss)		$	260,275			$	(186,784)
	Interest expense		64,951				63,594
	Provision (benefit) for income taxes		80,528				(52,235)
	Depreciation, depletion, amortization and accretion		509,608				536,696
	Property impairments		11,436				222,529
	Exploration expenses		4,645				11,637
	Impact from derivative instruments:
	Total loss on derivatives, net		43,507				—
	Total cash paid on derivatives, net		(29,437)				—
	Non-cash loss on derivatives, net		14,070				—
	Non-cash equity compensation		16,927				16,441
	(Gain) loss on extinguishment of debt		196				(17,631)
	EBITDAX (non-GAAP)		$	962,636			$	594,247

The following table provides a reconciliation of our net cash provided by operating activities to EBITDAX for the periods presented.

			Three months ended March 31,
	In thousands		2021				2020
	Net cash provided by operating activities		$	1,040,260			$	663,818
	Current income tax benefit		—				(2,223)
	Interest expense		64,951				63,594
	Exploration expenses, excluding dry hole costs		4,645				5,378
	Gain (loss) on sale of assets and other, net		207				(4,502)
	Other, net		(1,383)				(3,001)
	Changes in assets and liabilities		(146,044)				(128,817)
	EBITDAX (non-GAAP)		$	962,636			$	594,247

Non-GAAP Free Cash Flow

Our presentation of free cash flow is a non-GAAP measure. We define free cash flow as cash flows from operations before changes in working capital items, less capital expenditures, excluding acquisitions, plus noncontrolling interest capital contributions, less distributions to noncontrolling interests. Noncontrolling interest capital contributions and distributions primarily relate to our 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, to service or incur additional debt, and to measure management's success in creating shareholder value. 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.

The following table reconciles net cash provided by operating activities as determined under U.S. GAAP to free cash flow for the three months ended March 31, 2021.

	In thousands		1Q 2021
	Net cash provided by operating activities (GAAP)		$	1,040,260
	Exclude: Changes in working capital items		(146,044)
	Less: Capital expenditures (1)		(294,278)
	Plus: Contributions from noncontrolling interests		10,937
	Less: Distributions to noncontrolling interests		(4,927)
	Free cash flow (non-GAAP)		$	605,948
	(1) Capital expenditures are calculated as follows:
	In thousands		1Q 2021
	Cash paid for capital expenditures		$	428,182
	Less: Total acquisitions		(207,536)
	Plus: Change in accrued capital expenditures & other		70,934
	Plus: Exploratory seismic costs		2,698
	Capital expenditures		$	294,278

Non-GAAP Net Sales Prices

Revenues and transportation expenses associated with production from our operated properties are reported separately. 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. As a result, the separate presentation of revenues and transportation expenses from our operated properties differs from the net presentation 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 and to achieve comparability between operated and non-operated revenues, 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 periods presented.

			Three months ended March 31, 2021													Three months ended March 31, 2020
	In thousands		Crude oil				Natural gas				Total					Crude oil				Natural gas				Total
	Crude oil and natural gas sales (GAAP)		$	768,768			$	478,765			$	1,247,533				$	773,770			$	88,973			$	862,743
	Less: Transportation expenses		(40,079)				(10,177)				(50,256)					(50,372)				(10,130)				(60,502)
	Net crude oil and natural gas sales (non-GAAP)		$	728,689			$	468,588			$	1,197,277				$	723,398			$	78,843			$	802,241
	Sales volumes (MBbl/MMcf/MBoe)		13,726				84,289				27,774					18,251				87,453				32,826
	Net sales price (non-GAAP)		$	53.09			$	5.56			$	43.11				$	39.64			$	0.90			$	24.44

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 March 31,
			2021				2020
	Total G&A per Boe (GAAP)		$	1.90			$	1.31
	Less: Non-cash equity compensation per Boe		(0.61)				(0.50)
	Cash G&A per Boe (non-GAAP)		$	1.29			$	0.81

 

Continental Resources, Inc.
2021 Guidance
As of April 28, 2021
			2021
Full-year average oil production (Bopd)			160,000 to 165,000
Full-year average natural gas production (Mcfpd)			880,000 to 920,000
Capital expenditures budget			$1.4 billion
Full-Year Operating Expenses:
Production expense per Boe			$3.25 to $3.75
Production tax (% of net oil & gas revenue)			7.9% to 8.1%
Cash G&A expense per Boe(1)			$1.20 to $1.40
Non-cash equity compensation per Boe			$0.45 to $0.55
DD&A per Boe			$16.50 to $18.50
2Q21 to 4Q21 Average Price Differentials:			2Q21 to 4Q21
NYMEX WTI crude oil (per barrel of oil)			($3.75) to ($4.75)
Henry Hub natural gas(2) (per Mcf)			($0.50) to $0.00

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 a projected range of $1.65 to $1.95 per Boe.

2.  Includes natural gas liquids production in differential range.

 

2021 Capital Expenditures
The following table provides the breakout of budgeted capital expenditures:
($ in Millions)	North D&C			South D&C		Leasehold, Facilities, Other(1)
Capex	$732			$380		$288
1.  Includes $13 million of minerals royalty acquisitions attributable to Continental. Excludes $52 million of minerals acquisitions attributable to Franco-Nevada.
2021 Operational Detail
The following table provides additional operational detail for wells expected to have first production in 2021:
Asset	Average Rigs		Gross Operated Wells		Net Operated Wells		Total Net Wells(1)
North	7		143		85		94
South	4		67		54		57
Total	11		210		139		151
1.  Represents projected net operated and non-operated wells with first production.

 

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SOURCE Continental Resources