Continental Resources Third Quarter 2017 Results’ Beat Estimates

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Continental Resources net income includes certain items typically excluded by the investment community in published estimates, the result of which is referred to as “adjusted net income.” In third quarter 2017, these typically excluded items in aggregate represented $21.54 million, or $0.06 per diluted share, which reduced Continental’s reported net income. Adjusted net income for the third quarter was $32.16 million, or $0.09 per diluted share.

Net cash provided by operating activities for third quarter 2017 was $431.4 million. EBITDAX for third quarter 2017 was $563.8 million. Definitions and reconciliations of adjusted net income (loss), adjusted net income (loss) per share, EBITDAX and cash G&A expense to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures are provided in the supporting tables and 2017 guidance summary at the conclusion of this press release.

“Continental’s performance year-to-date demonstrates industry leadership in capital disciplined production growth,” said Harold Hamm, Chairman and Chief Executive Officer. “Continental’s operations continue to become more capital efficient each quarter, allowing us to sustain our low-cost advantage. Additionally, due to continued strong well performance in all of our plays, we are raising our exit rate production guidance to 280,000 to 290,000 Boe per day, a 33% to 38% increase over fourth quarter 2016. This positions us for strong, cash-flow-positive growth in 2018.”

Crude Oil Represents 58% of Third Quarter Total Production

Third quarter 2017 net production totaled 22.3 million Boe, or 242,788 Boe per day, up 7% over second quarter 2017. Crude oil production was 140,611 Bo per day, or 58% of production, for third quarter 2017, a 12% increase over second quarter. Natural gas production averaged 613.1 million cubic feet (MMcf) per day, or 42% of production.

Third quarter production was negatively impacted in September by unusually rainy weather in the Bakken as well as midstream curtailments in Oklahoma associated with Hurricane Harvey. The net impact on third quarter production was a reduction of approximately 3,500 Boe per day. Apart from these two events, estimated production for the third quarter would have been in excess of 246,000 Boe per day. October production is estimated to be in excess of 275,000 Boe per day, with 59% being oil.

Fourth quarter average daily oil production is expected to be 14% to 18% higher than third quarter. Total fourth quarter 2017 production is expected to be in a range of 275,000 to 285,000 Boe per day, and the 2017 exit rate production is now expected to be in a range of 280,000 to 290,000 Boe per day. Full-year 2017 production is expected to be in a range of 238,000 to 242,000 Boe per day.

The Company’s full 2017 guidance is stated in a table at the conclusion of the release.

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

The Company also continued to improve key Bakken operating metrics during the third quarter. Average spud-to-total-depth drilling time for the third quarter was 10.5 days, a quarter-over-quarter improvement of 8% and an improvement of 27% compared with 2016’s average drilling time. As a result, average drilling cost per well was down nearly 6% from the second quarter and approximately 25% below the 2016 average.

Bakken: Increasing Value Through Technology

Continental’s Bakken net production averaged 136,851 Boe per day in third quarter 2017, a 14% increase over second quarter 2017 production. The Company completed 122 gross (58 net) operated and non-operated Bakken wells during the quarter. The Company currently has four operated drilling rigs and four stimulation crews active in the Bakken. At September 30, 2017, the Company had 172 gross operated drilled but uncompleted or completed but not producing wells (DUCs). The Company expects to end 2017 with approximately 150 DUCs in inventory.

In the third quarter, the Company had 57 gross operated wells with first production, with an average 24-hour IP rate of 1,752 Boe per day (80% oil). Fifteen of the wells posted 24-hour IP rates of more than 2,000 Boe per day. All of the wells were completed using the Company’s optimized completion technology that includes various combinations of larger proppant loads, tighter stage spacing and diverters, along with accelerated flow backs and high-capacity lift. Through third quarter 2017, the Company has brought on over 100 Bakken optimized wells, and their average production is in line with and slightly outperforming the Company’s updated Bakken type curve announced last quarter. The new 1,100 MBoe Bakken type curve includes a 12% uplift in estimated ultimate recovery (EUR) and doubles the expected rate of return to 82% at $50 WTI, compared with the Company’s previous type curve. The increased type curve yields approximately $2 million of gross incremental cash flow per well during the first year, cutting payouts in half to approximately 15 months per well.

“Our optimized completions are unlocking more value from our Bakken assets than ever before,” said Jack Stark, President. “This is a key catalyst that will drive our ability to deliver cash-flow-positive, oil-weighted growth for years to come.”

The Company also continued to improve key Bakken operating metrics during the third quarter. Average spud-to-total-depth drilling time for the third quarter was 10.5 days, a quarter-over-quarter improvement of 8% and an improvement of 27% compared with 2016’s average drilling time. As a result, average drilling cost per well was down nearly 6% from the second quarter and approximately 25% below the 2016 average.

 

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