Company Quick10K Filing
Quick10K
Continental Resources
Closing Price ($) Shares Out (MM) Market Cap ($MM)
$42.03 377 $15,830
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-08-05 Earnings, Regulation FD, Exhibits
8-K 2019-06-04 Officers
8-K 2019-05-16 Shareholder Vote
8-K 2019-04-29 Earnings, Regulation FD, Exhibits
8-K 2019-02-18 Earnings, Regulation FD, Exhibits
8-K 2019-02-13 Earnings, Exhibits
8-K 2019-02-12 Officers
8-K 2018-10-29 Earnings, Regulation FD, Exhibits
8-K 2018-08-07 Earnings, Regulation FD, Exhibits
8-K 2018-07-24 Earnings, Exhibits
8-K 2018-05-17 Shareholder Vote
8-K 2018-05-02 Earnings, Regulation FD, Exhibits
8-K 2018-04-09 Enter Agreement, Leave Agreement, Off-BS Arrangement, Exhibits
8-K 2018-03-26 Officers
8-K 2018-03-19 Officers
8-K 2018-02-21 Earnings, Regulation FD, Exhibits
8-K 2018-02-16 Other Events
8-K 2018-02-15 Earnings, Exhibits
VOD Vodafone Group Public 48,610
CDNS Cadence Design Systems 19,310
IRBT Irobot 2,710
SANM Sanmina 2,220
FBM Foundation Building Materials 668
BFC Bank First National 428
RMNI Rimini Street 328
VNCE Vince Holding 175
ABFF Ceres Abingdon 0
LCLP Life Clips 0
CLR 2019-06-30
Part I. Financial Information
Item 1. Financial Statements
Note 1. Organization and Nature of Business
Note 2. Basis of Presentation and Significant Accounting Policies
Note 3. Supplemental Cash Flow Information
Note 4. Revenues
Note 5. Derivative Instruments
Note 6. Fair Value Measurements
Note 7. Long-Term Debt
Note 8. Leases
Note 9. Commitments and Contingencies
Note 10. Stock-Based Compensation
Note 11. Shareholders' Equity
Note 12. Income Taxes
Note 13. Subsequent Event
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II. Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 clr2q2019-ex31i.htm
EX-31.2 clr2q2019-ex31ii.htm
EX-32 clr2q2019ex32.htm

Continental Resources Earnings 2019-06-30

CLR 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

Document
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xbrli:shares xbrli:pure iso4217:USD xbrli:shares
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________________
FORM 10-Q
________________________________________
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2019
or
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-32886
 ____________________________________
logoa02a13.jpg
 CONTINENTAL RESOURCES, INC
(Exact name of registrant as specified in its charter)
 ____________________________________
Oklahoma
 
 
 
 
 
73-0767549
(State or other jurisdiction of incorporation or organization)
 
 
 
 
 
(I.R.S. Employer Identification No.)
 
 
 
 
 
 
 
 
20 N. Broadway,
Oklahoma City,
Oklahoma
73102
 
 
 
(Address of principal executive offices)
(Zip Code)
 
(405234-9000
(Registrant’s telephone number, including area code)
Not Applicable
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
 Trading symbol(s)
Name of each exchange on which registered
Common Stock, $0.01 par value
CLR
New York Stock Exchange
 ____________________________________
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes x    No ¨
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes x    No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
x
  
Accelerated filer
  
Non-accelerated filer
 
  
Smaller reporting company
  
 
 
 
 
Emerging growth company
 
 
 
 
 
 
 
 
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes     No x
374,419,853 shares of our $0.01 par value common stock were outstanding on July 31, 2019.




Table of Contents
 
 
 
Item 1.
 
 
 
 
 
Item 2.
Item 3.
Item 4.
 
 
 
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
 
When we refer to “us,” “we,” “our,” “Company,” or “Continental” we are describing Continental Resources, Inc. and our subsidiaries.




Glossary of Crude Oil and Natural Gas Terms

The terms defined in this section may be used throughout this report:
“Bbl” One stock tank barrel, of 42 U.S. gallons liquid volume, used herein in reference to crude oil, condensate or natural gas liquids.
“Boe” Barrels of crude oil equivalent, with six thousand cubic feet of natural gas being equivalent to one barrel of crude oil based on the average equivalent energy content of the two commodities.
“Btu” British thermal unit, which represents the amount of energy needed to heat one pound of water by one degree Fahrenheit and can be used to describe the energy content of fuels.
“completion” The process of treating a drilled well followed by the installation of permanent equipment for the production of crude oil and/or natural gas.
“developed acreage” The number of acres allocated or assignable to productive wells or wells capable of production.
“development well” A well drilled within the proved area of a crude oil or natural gas reservoir to the depth of a stratigraphic horizon known to be productive.
“dry hole” Exploratory or development well that does not produce crude oil and/or natural gas in economically producible quantities.
“exploratory well” A well drilled to find crude oil or natural gas in an unproved area, to find a new reservoir in an existing field previously found to be productive of crude oil or natural gas in another reservoir, or to extend a known reservoir beyond the proved area.
“field” An area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature or stratigraphic condition. The field name refers to the surface area, although it may refer to both the surface and the underground productive formations.
“formation” A layer of rock which has distinct characteristics that differs from nearby rock.
"gross acres" or "gross wells" Refers to the total acres or wells in which a working interest is owned.
“MBbl” One thousand barrels of crude oil, condensate or natural gas liquids.
“MBoe” One thousand Boe.
“Mcf” One thousand cubic feet of natural gas.
“MMBoe” One million Boe.
“MMBtu” One million British thermal units.
“MMcf” One million cubic feet of natural gas.
net acres” or "net wells" Refers to the sum of the fractional working interests owned in gross acres or gross wells.
"Net crude oil and natural gas sales" Represents total crude oil and natural gas sales less total transportation expenses. Net crude oil and natural gas sales presented herein are non-GAAP measures. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures for a discussion and calculation of this measure.
"Net sales price" Represents the average net wellhead sales price received by the Company for its crude oil or natural gas sales after deducting transportation expenses. Amount is calculated by taking revenues less transportation expenses divided by sales volumes for a period, whether for crude oil or natural gas, as applicable. Net sales prices presented herein are non-GAAP measures. See Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Non-GAAP Financial Measures for a discussion and calculation of this measure.
“NYMEX” The New York Mercantile Exchange.

i



“play” A portion of the exploration and production cycle following the identification by geologists and geophysicists of areas with potential crude oil and natural gas reserves.
“proved reserves” The quantities of crude oil and natural gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs and under existing economic conditions, operating methods, and government regulations prior to the time at which contracts providing the right to operate expire, unless evidence indicates renewal is reasonably certain.
“reservoir” A porous and permeable underground formation containing a natural accumulation of producible crude oil and/or natural gas that is confined by impermeable rock or water barriers and is separate from other reservoirs.
“royalty interest” Refers to the ownership of a percentage of the resources or revenues produced from a crude oil or natural gas property. A royalty interest owner does not bear exploration, development, or operating expenses associated with drilling and producing a crude oil or natural gas property.
“SCOOP” Refers to the South Central Oklahoma Oil Province, a term used to describe properties located in the Anadarko basin of Oklahoma in which we operate. Our SCOOP acreage extends across portions of Garvin, Grady, Stephens, Carter, McClain and Love counties of Oklahoma and has the potential to contain hydrocarbons from a variety of conventional and unconventional reservoirs overlying and underlying the Woodford formation.
"STACK" Refers to Sooner Trend Anadarko Canadian Kingfisher, a term used to describe a resource play located in the Anadarko Basin of Oklahoma characterized by stacked geologic formations with major targets in the Meramec, Osage and Woodford formations. A significant portion of our STACK acreage is located in over-pressured portions of Blaine, Dewey and Custer counties of Oklahoma.
“undeveloped acreage” Lease acreage on which wells have not been drilled or completed to a point that would permit the production of commercial quantities of crude oil and/or natural gas.
“unit” The joining of all or substantially all interests in a reservoir or field, rather than a single tract, to provide for development and operation without regard to separate property interests. Also, the area covered by a unitization agreement.
“working interest” The right granted to the lessee of a property to explore for and to produce and own crude oil, natural gas, or other minerals. The working interest owners bear the exploration, development, and operating costs on either a cash, penalty, or carried basis.
 


ii


Cautionary Statement for the Purpose of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995
This report and information incorporated by reference in this report include “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 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, included in this report are forward-looking statements. 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 may include, but are not limited to, statements about:
our strategy;
our business and financial plans;
our future operations;
our crude oil and natural gas reserves and related development plans;
technology;
future crude oil, natural gas liquids, and natural gas prices and differentials;
the timing and amount of future production of crude oil and natural gas and flaring activities;
the amount, nature and timing of capital expenditures;
estimated revenues, expenses and results of operations;
drilling and completing of wells;
competition;
marketing of crude oil and natural gas;
transportation of crude oil, natural gas liquids, and natural gas to markets;
property exploitation, property acquisitions and dispositions, or joint development opportunities;
costs of exploiting and developing our properties and conducting other operations;
our financial position or dividend payments;
general economic conditions;
credit markets;
our liquidity and access to capital;
the impact of governmental policies, laws and regulations, as well as regulatory and legal proceedings involving us and of scheduled or potential regulatory or legal changes;
our future operating and financial results;
our future commodity or other hedging arrangements; and
the ability and willingness of current or potential lenders, hedging contract counterparties, customers, and working interest owners to fulfill their obligations to us or to enter into transactions with us in the future on terms that are acceptable to us.
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 or will not change over time. The risks and uncertainties that may affect the operations, performance and results of the business and forward-looking statements include, but are not limited to, those risk factors and other cautionary statements described under Part II, Item 1A. Risk Factors and elsewhere in this report, if any, our Annual Report on Form 10-K for the year ended December 31, 2018, registration statements we file from time to time with the Securities and Exchange Commission, and other announcements we make 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 report or our Annual Report on Form 10-K 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 expressly stated above or 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.

iii


PART I. Financial Information
ITEM 1.
Financial Statements
Continental Resources, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
 
 
June 30, 2019
 
December 31, 2018
In thousands, except par values and share data
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
206,482

 
$
282,749

Receivables:
 
 
 
 
Crude oil and natural gas sales
 
650,870

 
644,107

Affiliated parties
 
206

 
73

Joint interest and other, net
 
378,009

 
368,235

Derivative assets
 
46,204

 
15,612

Inventories
 
110,894

 
88,544

Prepaid expenses and other
 
21,010

 
13,041

Total current assets
 
1,413,675

 
1,412,361

Net property and equipment, based on successful efforts method of accounting
 
14,387,960

 
13,869,800

Operating lease right-of-use assets
 
12,997

 

Other noncurrent assets
 
14,790

 
15,786

Total assets
 
$
15,829,422

 
$
15,297,947

 
 
 
 
 
Liabilities and equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable trade
 
$
738,311

 
$
717,560

Revenues and royalties payable
 
339,079

 
400,567

Payables to affiliated parties
 
83

 
203

Accrued liabilities and other
 
261,609

 
266,819

Dividends payable
 
18,747

 

Current portion of operating lease liabilities
 
8,120

 

Current portion of long-term debt
 
2,397

 
2,360

Total current liabilities
 
1,368,346

 
1,387,509

Long-term debt, net of current portion
 
5,767,316

 
5,765,989

Other noncurrent liabilities:
 
 
 
 
Deferred income tax liabilities, net
 
1,702,075

 
1,574,436

Asset retirement obligations, net of current portion
 
145,218

 
136,986

Operating lease liabilities, net of current portion
 
4,877

 

Other noncurrent liabilities
 
11,755

 
11,166

Total other noncurrent liabilities
 
1,863,925

 
1,722,588

Commitments and contingencies (Note 9)
 
 
 


Equity:
 
 
 
 
Preferred stock, $0.01 par value; 25,000,000 shares authorized; no shares issued and outstanding
 

 

Common stock, $0.01 par value; 1,000,000,000 shares authorized; 374,943,548 shares issued and outstanding at June 30, 2019; 376,021,575 shares issued and outstanding at December 31, 2018
 
3,749

 
3,760

Additional paid-in capital
 
1,368,272

 
1,434,823

Accumulated other comprehensive income
 
561

 
415

Retained earnings
 
5,110,921

 
4,706,135

Total shareholders’ equity attributable to Continental Resources
 
6,483,503

 
6,145,133

Noncontrolling interests
 
346,332

 
276,728

Total equity
 
6,829,835

 
6,421,861

Total liabilities and equity
 
$
15,829,422

 
$
15,297,947


The accompanying notes are an integral part of these condensed consolidated financial statements.
1



Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Comprehensive Income
 
 
 
Three months ended June 30,
 
Six months ended June 30,
In thousands, except per share data
 
2019
 
2018
 
2019
 
2018
Revenues:
 
 
 
 
 
 
 
 
Crude oil and natural gas sales
 
$
1,137,425

 
$
1,137,528

 
$
2,247,009

 
$
2,251,380

Gain (loss) on natural gas derivatives, net
 
53,448

 
(12,685
)
 
52,324

 
(2,511
)
Crude oil and natural gas service operations
 
17,509

 
12,270

 
33,284

 
29,272

Total revenues
 
1,208,382

 
1,137,113

 
2,332,617

 
2,278,141

 
 
 
 
 
 
 
 
 
Operating costs and expenses:
 
 
 
 
 
 
 
 
Production expenses
 
112,430

 
90,171

 
219,396

 
183,133

Production taxes
 
93,866

 
83,595

 
180,306

 
164,175

Transportation expenses
 
53,393

 
47,254

 
102,531

 
96,551

Exploration expenses
 
3,090

 
303

 
4,927

 
2,023

Crude oil and natural gas service operations
 
11,206

 
7,688

 
18,392

 
12,271

Depreciation, depletion, amortization and accretion
 
485,621

 
447,200

 
980,641

 
901,578

Property impairments
 
21,339

 
29,162

 
46,655

 
62,946

General and administrative expenses
 
47,226

 
47,174

 
94,844

 
90,217

Net (gain) loss on sale of assets and other
 
364

 
(6,710
)
 
112

 
(6,751
)
Total operating costs and expenses
 
828,535

 
745,837

 
1,647,804

 
1,506,143

Income from operations
 
379,847

 
391,276

 
684,813

 
771,998

Other income (expense):
 
 
 
 
 
 
 
 
Interest expense
 
(68,471
)
 
(74,288
)
 
(136,308
)
 
(150,182
)
Other
 
723

 
708

 
2,077

 
1,362


 
(67,748
)
 
(73,580
)
 
(134,231
)
 
(148,820
)
Income before income taxes
 
312,099

 
317,696

 
550,582

 
623,178

Provision for income taxes
 
(75,649
)
 
(75,232
)
 
(127,639
)
 
(146,768
)
Net income
 
236,450

 
242,464

 
422,943

 
476,410

Net loss attributable to noncontrolling interests
 
(107
)
 

 
(590
)
 

Net income attributable to Continental Resources
 
$
236,557

 
242,464

 
$
423,533

 
476,410

 
 
 
 
 
 
 
 
 
Net income per share attributable to Continental Resources:
 
 
 
 
 
 
 
 
Basic
 
$
0.63

 
$
0.65

 
$
1.14

 
$
1.28

Diluted
 
$
0.63

 
$
0.65

 
$
1.13

 
$
1.27

 
 
 
 
 
 
 
 
 
Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
$
236,450

 
$
242,464

 
$
422,943

 
$
476,410

Other comprehensive income, net of tax:
 
 
 
 
 
 
 
 
Foreign currency translation adjustments
 
30

 
16

 
146

 
18

Total other comprehensive income, net of tax
 
30

 
16

 
146

 
18

Comprehensive income
 
236,480

 
242,480

 
423,089

 
476,428

Comprehensive loss attributable to noncontrolling interests
 
(107
)
 

 
(590
)
 

Comprehensive income attributable to Continental Resources
 
$
236,587

 
$
242,480

 
$
423,679

 
$
476,428



The accompanying notes are an integral part of these condensed consolidated financial statements.
2



Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity
 
Three and six months ended June 30, 2019
 
Shareholders’ equity attributable to Continental Resources
 
 
 
 
In thousands, except share data
 
Shares
outstanding
 
Common
stock
 
Additional
paid-in
capital
 
Accumulated
other
comprehensive
income
 
Treasury
stock
 
Retained
earnings
 
Total shareholders’ equity of Continental Resources
 
Noncontrolling
interests
 
Total equity
Balance at December 31, 2018
 
376,021,575

 
$
3,760

 
$
1,434,823

 
$
415

 
$

 
$
4,706,135

 
$
6,145,133

 
$
276,728

 
$
6,421,861

Net income (loss)
 

 

 

 

 

 
186,976

 
186,976

 
(483
)
 
186,493

Other comprehensive income, net of tax
 

 

 

 
116

 

 

 
116

 

 
116

Stock-based compensation
 

 

 
12,095

 

 

 

 
12,095

 

 
12,095

Restricted stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
1,333,602

 
13

 

 

 

 

 
13

 

 
13

Repurchased and canceled
 
(439,419
)
 
(4
)
 
(20,618
)
 

 

 

 
(20,622
)
 

 
(20,622
)
Forfeited
 
(147,074
)
 
(1
)
 

 

 

 

 
(1
)
 

 
(1
)
Contributions from noncontrolling interests
 

 

 

 

 

 

 

 
42,204

 
42,204

Distributions to noncontrolling interests
 

 

 

 

 

 

 

 
(3,856
)
 
(3,856
)
Balance at March 31, 2019
 
376,768,684

 
$
3,768

 
$
1,426,300

 
$
531

 
$

 
$
4,893,111

 
$
6,323,710

 
$
314,593

 
$
6,638,303

Net income (loss)
 

 

 

 

 

 
236,557

 
236,557

 
(107
)
 
236,450

Cash dividends declared ($0.05 per share)
 

 

 

 

 

 
(18,747
)
 
(18,747
)
 

 
(18,747
)
Common stock repurchased
 

 

 

 

 
(69,661
)
 

 
(69,661
)
 

 
(69,661
)
Common stock retired
 
(1,800,000
)
 
(18
)
 
(69,643
)
 

 
69,661

 

 

 

 

Other comprehensive income, net of tax
 

 

 

 
30

 

 

 
30

 

 
30

Stock-based compensation
 

 

 
12,176

 

 

 

 
12,176

 

 
12,176

Restricted stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
59,639

 
1

 

 

 

 

 
1

 

 
1

Repurchased and canceled
 
(13,335
)
 
(1
)
 
(561
)
 

 

 

 
(562
)
 

 
(562
)
Forfeited
 
(71,440
)
 
(1
)
 

 

 

 

 
(1
)
 

 
(1
)
Contributions from noncontrolling interests
 

 

 

 

 

 

 

 
35,118

 
35,118

Distributions to noncontrolling interests
 

 

 

 

 

 

 

 
(3,272
)
 
(3,272
)
Balance at June 30, 2019
 
374,943,548

 
$
3,749

 
$
1,368,272

 
$
561

 
$

 
$
5,110,921

 
$
6,483,503

 
$
346,332

 
$
6,829,835








The accompanying notes are an integral part of these condensed consolidated financial statements.
3







Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Equity (Continued)

Three and six months ended June 30, 2018
 
Shareholders’ equity attributable to Continental Resources
 
 
 
 
In thousands, except share data
 
Shares
outstanding
 
Common
stock
 
Additional
paid-in
capital
 
Accumulated
other
comprehensive
income
 
Treasury
stock
 
Retained
earnings
 
Total shareholders’ equity of Continental Resources
 
Noncontrolling
interests
 
Total equity
Balance at December 31, 2017
 
375,219,769

 
$
3,752

 
$
1,409,326

 
$
307

 
$

 
$
3,717,818

 
$
5,131,203

 
$

 
$
5,131,203

Net income
 

 

 

 

 

 
233,946

 
233,946

 

 
233,946

Other comprehensive income, net of tax
 

 

 

 
2

 

 

 
2

 

 
2

Stock-based compensation
 

 

 
10,905

 

 

 

 
10,905

 

 
10,905

Restricted stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
1,180,032

 
12

 

 

 

 

 
12

 

 
12

Repurchased and canceled
 
(276,108
)
 
(3
)
 
(14,843
)
 

 

 

 
(14,846
)
 

 
(14,846
)
Forfeited
 
(66,489
)
 
(1
)
 

 

 

 

 
(1
)
 

 
(1
)
Balance at March 31, 2018
 
376,057,204

 
$
3,760

 
$
1,405,388

 
$
309

 
$

 
$
3,951,764

 
$
5,361,221

 
$

 
$
5,361,221

Net income
 

 

 

 

 

 
242,464

 
242,464

 

 
242,464

Other comprehensive income, net of tax
 

 

 

 
16

 

 

 
16

 

 
16

Stock-based compensation
 

 

 
10,560

 

 

 

 
10,560

 

 
10,560

Restricted stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
97,459

 
1

 

 

 

 

 
1

 

 
1

Repurchased and canceled
 
(11,398
)
 

 
(773
)
 

 

 

 
(773
)
 

 
(773
)
Forfeited
 
(112,468
)
 
(1
)
 

 

 

 

 
(1
)
 

 
(1
)
Balance at June 30, 2018
 
376,030,797

 
$
3,760

 
$
1,415,175

 
$
325

 
$

 
$
4,194,228

 
$
5,613,488

 
$

 
$
5,613,488



The accompanying notes are an integral part of these condensed consolidated financial statements.
4



Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 
 
Six months ended June 30,
In thousands
 
2019
 
2018
Cash flows from operating activities
 
 
Net income
 
$
422,943

 
$
476,410

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation, depletion, amortization and accretion
 
983,183

 
902,217

Property impairments
 
46,655

 
62,946

Non-cash (gain) loss on derivatives, net
 
(30,592
)
 
11,465

Stock-based compensation
 
24,283

 
21,478

Provision for deferred income taxes
 
127,639

 
146,768

Gain (loss) on sale of assets, net
 
112

 
(6,751
)
Other, net
 
4,536

 
7,160

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
(15,144
)
 
(79,043
)
Inventories
 
(22,438
)
 
(17,904
)
Other current assets
 
(7,150
)
 
(8,138
)
Accounts payable trade
 
38,176

 
103,710

Revenues and royalties payable
 
(61,472
)
 
5,857

Accrued liabilities and other
 
(5,732
)
 
17,550

Other noncurrent assets and liabilities
 
(95
)
 
(3,732
)
Net cash provided by operating activities
 
1,504,904

 
1,639,993

 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Exploration and development
 
(1,528,022
)
 
(1,334,681
)
Purchase of producing crude oil and natural gas properties
 
(20,527
)
 
(24,097
)
Purchase of other property and equipment
 
(9,848
)
 
(12,205
)
Proceeds from sale of assets
 
652

 
27,380

Net cash used in investing activities
 
(1,557,745
)
 
(1,343,603
)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
Credit facility borrowings
 
245,000

 
803,000

Repayment of credit facility
 
(245,000
)
 
(991,000
)
Repayment of other debt
 
(1,162
)
 
(1,134
)
Debt issuance costs
 

 
(5,524
)
Contributions from noncontrolling interests
 
75,717

 

Distributions to noncontrolling interests
 
(7,166
)
 

Repurchase of common stock
 
(69,661
)
 

Repurchase of restricted stock for tax withholdings
 
(21,184
)
 
(15,619
)
Net cash used in financing activities
 
(23,456
)
 
(210,277
)
Effect of exchange rate changes on cash
 
30

 
(26
)
Net change in cash and cash equivalents
 
(76,267
)
 
86,087

Cash and cash equivalents at beginning of period
 
282,749

 
43,902

Cash and cash equivalents at end of period
 
$
206,482

 
$
129,989


The accompanying notes are an integral part of these condensed consolidated financial statements.
5


Continental Resources, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements
Note 1. Organization and Nature of Business
Continental Resources, Inc. (the “Company”) was formed in 1967 and is incorporated under the laws of the State of Oklahoma. The Company’s principal business is crude oil and natural gas exploration, development and production with properties primarily located in the North, South, and East regions of the United States. Additionally, the Company pursues the acquisition and management of perpetually owned minerals located in certain of its key operating areas. The North region consists of properties north of Kansas and west of the Mississippi River and includes North Dakota Bakken, Montana Bakken, and the Red River units. The South region includes all properties south of Nebraska and west of the Mississippi River including various plays in the SCOOP and STACK areas of Oklahoma. The East region is primarily comprised of undeveloped leasehold acreage east of the Mississippi River with no significant drilling or production operations.
A majority of the Company’s operations are located in the North region, with that region comprising 62% of the Company’s crude oil and natural gas production and 74% of its crude oil and natural gas revenues for the six months ended June 30, 2019. The Company's principal producing properties in the North region are located in the Bakken field of North Dakota and Montana. The Company's operations in the South region continue to expand with its increased activity in the SCOOP and STACK plays and that region comprised 38% of the Company's crude oil and natural gas production and 26% of its crude oil and natural gas revenues for the six months ended June 30, 2019.
For the six months ended June 30, 2019, crude oil accounted for 58% of the Company’s total production and 85% of its crude oil and natural gas revenues.    
Note 2. Basis of Presentation and Significant Accounting Policies
Basis of presentation
The condensed consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and entities in which the Company has a controlling financial interest. Intercompany accounts and transactions have been eliminated upon consolidation. Noncontrolling interests reflected herein represent third party ownership in the net assets of consolidated subsidiaries. The portions of consolidated net income and equity attributable to the noncontrolling interests are presented separately in the Company’s financial statements.
This report has been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) applicable to interim financial information. Because this is an interim period filing presented using a condensed format, it does not include all disclosures required by accounting principles generally accepted in the United States (“U.S. GAAP”), although the Company believes the disclosures are adequate to make the information not misleading. You should read this Quarterly Report on Form 10-Q (“Form 10-Q”) together with the Company’s Annual Report on Form 10-K for the year ended December 31, 2018 (“2018 Form 10-K”), which includes a summary of the Company’s significant accounting policies and other disclosures.
The condensed consolidated financial statements as of June 30, 2019 and for the three and six month periods ended June 30, 2019 and 2018 are unaudited. The condensed consolidated balance sheet as of December 31, 2018 was derived from the audited balance sheet included in the 2018 Form 10-K. The Company has evaluated events or transactions through the date this report on Form 10-Q was filed with the SEC in conjunction with its preparation of these condensed consolidated financial statements.
The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure and estimation of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. Actual results may differ from those estimates. The most significant estimates and assumptions impacting reported results are estimates of the Company’s crude oil and natural gas reserves, which are used to compute depreciation, depletion, amortization and impairment of proved crude oil and natural gas properties. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) necessary for a fair presentation in accordance with U.S. GAAP have been included in these unaudited condensed consolidated financial statements. The results of operations for any interim period are not necessarily indicative of the results of operations that may be expected for any other interim period or for an entire year.
Earnings per share
Basic net income per share is computed by dividing net income attributable to the Company by the weighted-average number of shares outstanding for the period. In periods where the Company has net income, diluted earnings per share reflects the potential dilution of non-vested restricted stock awards, which are calculated using the treasury stock method. The following

6

Continental Resources, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements

table presents the calculation of basic and diluted weighted average shares outstanding and net income per share attributable to the Company for the three and six months ended June 30, 2019 and 2018.
 
 
Three months ended June 30,
 
Six months ended June 30,
In thousands, except per share data
 
2019
 
2018
 
2019
 
2018
Net income attributable to Continental Resources (numerator)
 
$
236,557

 
$
242,464

 
$
423,533

 
$
476,410

Weighted average shares (denominator):
 
 
 
 
 
 
 
 
Weighted average shares - basic
 
372,835

 
371,921

 
372,700

 
371,733

Non-vested restricted stock
 
1,174

 
2,584

 
1,857

 
2,850

Weighted average shares - diluted
 
374,009

 
374,505

 
374,557

 
374,583

Net income per share attributable to Continental Resources:
 
 
 
 
 
 
 
 
Basic
 
$
0.63

 
$
0.65

 
$
1.14

 
$
1.28

Diluted
 
$
0.63

 
$
0.65

 
$
1.13

 
$
1.27


Inventories
Inventory is comprised of crude oil held in storage or as line fill in pipelines, pipeline imbalances, and tubular goods and equipment to be used in the Company's exploration and development activities. Crude oil inventories are valued at the lower of cost or net realizable value primarily using the first-in, first-out inventory method. Tubular goods and equipment are valued primarily using a weighted average cost method applied to specific classes of inventory items.
The components of inventory as of June 30, 2019 and December 31, 2018 consisted of the following:
In thousands
 
June 30, 2019
 
December 31, 2018
Tubular goods and equipment
 
$
15,774

 
$
14,623

Crude oil
 
95,120

 
73,921

Total
 
$
110,894

 
$
88,544


Adoption of new accounting pronouncement
On January 1, 2019 the Company adopted Accounting Standards Update ("ASU") 2016-02, Leases (Topic 842). See Note 8. Leases for discussion of the adoption impact and the applicable disclosures required by the new guidance.
New accounting pronouncement not yet adopted
In June 2016 the Financial Accounting Standards Board ("FASB") issued ASU 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard changes how entities will measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace the currently required incurred loss approach with an expected loss model for instruments measured at amortized cost. The standard is effective for interim and annual periods beginning after December 15, 2019 and shall be applied using a modified retrospective approach resulting in a cumulative effect adjustment to retained earnings upon adoption. The Company continues to evaluate the new standard and is unable to estimate its financial statement impact at this time; however, the impact is not expected to be material. Historically, the Company's credit losses on crude oil and natural gas sales receivables and joint interest receivables have been immaterial.

7

Continental Resources, Inc. and Subsidiaries
Notes to Unaudited Condensed Consolidated Financial Statements

Note 3. Supplemental Cash Flow Information
The following table discloses supplemental cash flow information about cash paid for interest and income tax payments and refunds. Also disclosed is information about investing activities that affects recognized assets and liabilities but does not result in cash receipts or payments. 
 
 
Six months ended June 30,
In thousands
 
2019
 
2018
Supplemental cash flow information:
 
 
 
 
Cash paid for interest
 
$
132,064

 
$
122,940

Cash paid for income taxes
 
9

 

Cash received for income tax refunds
 
7

 
5

Non-cash investing activities:
 
 
 
 
Asset retirement obligation additions and revisions, net
 
5,266

 
3,562



As of June 30, 2019 and December 31, 2018, the Company had $297.8 million and $317.5 million, respectively, of accrued capital expenditures included in “Net property and equipment” and “Accounts payable trade” in the condensed consolidated balance sheets.
As of June 30, 2019 and December 31, 2018, the Company had $10.8 million and $9.3 million, respectively, of accrued contributions from noncontrolling interests included in "ReceivablesJoint interest and other, net" and "EquityNoncontrolling interests" in the condensed consolidated balance sheets.
As of June 30, 2019 and December 31, 2018, the Company had $1.3 million and $1.3 million, respectively, of accrued distributions to noncontrolling interests included in "Revenues and royalties payable" and "EquityNoncontrolling interests" in the condensed consolidated balance sheets.
On January 1, 2019 the Company adopted ASU 2016-02 which resulted in the non-cash recognition of offsetting right-of-use assets and lease liabilities totaling approximately $19 million. No significant additional right-of-use assets and lease liabilities have been recognized subsequent to January 1, 2019. See Note 8. Leases for additional information.
Note 4. Revenues
Below is a discussion of the nature, timing, and presentation of revenues arising from the Company's major revenue-generating arrangements.
Operated crude oil revenues – The Company pays third parties to transport the majority of its operated crude oil production from lease locations to downstream market centers, at which time the Company's customers take title and custody of the product in exchange for prices based on the particular market where the product was delivered. Operated crude oil revenues are recognized during the month in which control transfers to the customer and it is probable the Company will collect the consideration it is entitled to receive. Crude oil sales proceeds from operated properties are generally received by the Company within one month after the month in which a sale has occurred. Operated crude oil revenues are presented separately from transportation expenses as the Company controls the operated production prior to its transfer to customers. Transportation expenses associated with the Company's operated crude oil production totaled $46.0 million and $40.2 million for the three months ended June 30, 2019 and 2018, respectively, and $87.6 million and $