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Continental Resources Second Quarter 2021 Results

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Continental Resources, Inc. announced its second quarter 2021 operating and financial results.

CEO Bill Berry commented: "Continental is delivering strong asset performance in addition to capital and operational efficiency gains that are driving robust cash flow generation and exceptional shareholder value. The $0.04 increase to our quarterly fixed dividend and resumption of our $1.0 billion share repurchase program underscores our commitment to delivering peer leading shareholder capital return."

John Hart, Senior Vice President, Chief Financial Officer & Chief Strategy Officer, said: "Second quarter 2021 results underscore Continental's continued commitment to delivering robust cash flow generation, capital discipline, and low cost industry leadership that is translating to strong corporate returns underscored by our 18% projected ROCE in 2021."

Q2 Financials

The Company reported net income of $289.3 million, or $0.79 per diluted share, for the quarter ended June 30, 2021. In second quarter 2021, typically excluded items in aggregate represented $43.4 million, or $0.12 per diluted share, of Continental's reported net income. Adjusted net income for second quarter 2021 was $332.8 million, or $0.91 per diluted share (non-GAAP). Net cash provided by operating activities for second quarter 2021 was $672.8 million and EBITDAX was $990.9 million (non-GAAP).

Adjusted net income (loss), adjusted net income (loss) per share, EBITDAX, free cash flow, free cash flow yield, 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.

Cash Flow / Dividend

The Company generated $673 million of cash flow from operations and a Company record $634 million of free cash flow (non-GAAP) for the second quarter 2021. The Company now projects generating $3.8 billion of cash flow from operations and $2.4 billion of free cash flow (non-GAAP) for full-year 2021 at current strip prices, or approximately 19% free cash flow yield (non-GAAP). Projected full-year 2021 free cash flow (non-GAAP) is more than double the Company's original 2021 guidance.

The Company recently announced that the Board of Directors approved increasing the Company's quarterly fixed dividend to $0.15 per share on the Company's outstanding common stock, payable on August 20, 2021 to stockholders of record on August 10, 2021. This dividend is a $0.04 increase to the Company's $0.11 per share quarterly dividend paid in second quarter 2021, triple the Company's initial dividend paid in fourth quarter 2019 and equates to an approximately 1.7% annualized dividend yield⁴.

The Company is resuming its share repurchase program of $1.0 billion, which commenced in second quarter 2019. With $317 million of share repurchases previously executed, $683 million of share repurchase capacity remains available.

Debt Reduction Targets

The Company is accelerating its net debt reduction (non-GAAP) and is targeting $4.7 billion of projected total debt by year end 2021 and $3.7 billion of projected net debt (non-GAAP) by year end 2021, with a net debt to EBITDAX (non-GAAP) ratio of below 1.0x. The Company has reduced its total debt to $4.74 billion, with a cash balance of $150 million, equating to net debt (non-GAAP) of $4.59 billion as of June 30, 2021.

Additionally, the Company is projecting approximately 18% ROCE vs. its previous estimate of 12% for 2021.

Guidance

Due to continued outperformance, the Company is improving various 2021 guidance metrics and differentials. The Company has increased its 2021 annual natural gas production guidance to 900 to 1,000 MMcfpd. Production expense is projected to be improved to $3.00 to $3.50 per Boe in 2021. Production tax rate is projected to be improved to 7.3% to 7.6% in 2021. Continental projects 2021 guidance for DD&A of $15.00 to $17.00 per Boe, reflecting strong well productivity, capital efficiency and improved commodity prices. The Company's second half 2021 crude oil differentials guidance per barrel of oil is projected to average ($3.50) to ($4.25) and the Company's second half 2021 natural gas differentials guidance per Mcf is projected to average a premium of $0.25 to $0.75.

Q2 Ops Review

Second quarter 2021 total production averaged 338.7 MBoepd. Second quarter 2021 oil production averaged 166.8 MBopd. Second quarter 2021 natural gas production averaged 1,031.6 MMcfpd.

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