Company Quick10K Filing
Continental Resources
Price31.88 EPS2
Shares374 P/E15
MCap11,907 P/FCF5
Net Debt5,536 EBIT1,163
TEV17,443 TEV/EBIT15
TTM 2019-09-30, in MM, except price, ratios
10-Q 2020-03-31 Filed 2020-05-11
10-K 2019-12-31 Filed 2020-02-26
10-Q 2019-09-30 Filed 2019-10-30
10-Q 2019-06-30 Filed 2019-08-05
10-Q 2019-03-31 Filed 2019-04-29
10-K 2018-12-31 Filed 2019-02-19
10-Q 2018-09-30 Filed 2018-10-29
10-Q 2018-06-30 Filed 2018-08-07
10-Q 2018-03-31 Filed 2018-05-02
10-K 2017-12-31 Filed 2018-02-21
10-Q 2017-09-30 Filed 2017-11-07
10-Q 2017-06-30 Filed 2017-08-09
10-Q 2017-03-31 Filed 2017-05-03
10-K 2016-12-31 Filed 2017-02-22
10-Q 2016-09-30 Filed 2016-11-02
10-Q 2016-06-30 Filed 2016-08-03
10-Q 2016-03-31 Filed 2016-05-04
10-K 2015-12-31 Filed 2016-02-24
10-Q 2015-09-30 Filed 2015-11-04
10-Q 2015-06-30 Filed 2015-08-05
10-Q 2015-03-31 Filed 2015-05-06
10-K 2014-12-31 Filed 2015-02-24
10-Q 2014-09-30 Filed 2014-11-05
10-Q 2014-06-30 Filed 2014-08-06
10-Q 2014-03-31 Filed 2014-05-08
10-K 2013-12-31 Filed 2014-02-27
10-Q 2013-09-30 Filed 2013-11-07
10-Q 2013-06-30 Filed 2013-08-08
10-K 2012-12-31 Filed 2013-02-28
10-Q 2012-09-30 Filed 2012-11-08
10-Q 2012-06-30 Filed 2012-08-09
10-Q 2012-03-31 Filed 2012-05-03
10-K 2011-12-31 Filed 2012-02-24
10-Q 2011-09-30 Filed 2011-11-03
10-Q 2011-06-30 Filed 2011-08-05
10-Q 2011-03-31 Filed 2011-05-05
10-K 2010-12-31 Filed 2011-02-25
10-Q 2010-09-30 Filed 2010-11-05
10-Q 2010-06-30 Filed 2010-08-06
10-Q 2010-03-31 Filed 2010-05-06
10-K 2009-12-31 Filed 2010-02-26
8-K 2020-05-14
8-K 2020-05-11
8-K 2020-02-26
8-K 2019-12-11
8-K 2019-11-18
8-K 2019-10-30
8-K 2019-08-05
8-K 2019-06-04
8-K 2019-05-16
8-K 2019-04-29
8-K 2019-03-06
8-K 2019-02-18
8-K 2019-02-13
8-K 2019-02-12
8-K 2018-10-29
8-K 2018-08-07
8-K 2018-07-24
8-K 2018-05-17
8-K 2018-05-17
8-K 2018-05-02
8-K 2018-04-09
8-K 2018-03-26
8-K 2018-03-19
8-K 2018-02-21
8-K 2018-02-16
8-K 2018-02-15

CLR 10Q Quarterly Report

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. Allowance for Credit Losses
Note 6. Derivative Instruments
Note 7. Fair Value Measurements
Note 8. Long - Term Debt
Note 9. Leases
Note 10. Commitments and Contingencies
Note 11. Stock - Based Compensation
Note 12. Shareholders' Equity
Note 13. Income Taxes
Note 14. Subsequent Events
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 ex311-1q2020.htm
EX-31.2 ex312-1q2020.htm
EX-32 ex32-1q2020.htm

Continental Resources Earnings 2020-03-31

Balance SheetIncome StatementCash Flow
2016128402012201420172020
Assets, Equity
1.71.30.90.60.2-0.22012201420172020
Rev, G Profit, Net Income
1.10.60.1-0.4-0.9-1.42012201420172020
Ops, Inv, Fin

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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 March 31, 2020
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
 ____________________________________
logoa02a15.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
365,152,819 shares of our $0.01 par value common stock were outstanding on April 30, 2020.




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 Purpose of “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;
shutting in of production and the resumption of production activities;
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, dividend payments, bond repurchases, or share repurchases;
the impact of the COVID-19 (novel coronavirus) pandemic on economic conditions, the demand for crude oil, the Company's operations and the operations of its customers, suppliers, and service providers;
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, our Annual Report on Form 10-K for the year ended December 31, 2019, registration statements we file from time to time with the Securities and Exchange Commission, and other announcements we make from time to time.
Many of the foregoing risks and uncertainties are, and will be, exacerbated by the COVID-19 pandemic and any consequent worsening of the global economic environment. New factors emerge from time to time, and it is not possible for us to predict all such factors. 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.

iii


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.

iv


PART I. Financial Information
ITEM 1.
Financial Statements
Continental Resources, Inc. and Subsidiaries
Condensed Consolidated Balance Sheets
 
 
March 31, 2020
 
December 31, 2019
In thousands, except par values and share data
 
(Unaudited)
 
 
Assets
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
517,571

 
$
39,400

Receivables:
 
 
 
 
Crude oil and natural gas sales
 
389,203

 
726,876

Joint interest and other
 
305,519

 
317,018

Allowance for credit losses
 
(2,694
)
 
(2,407
)
Receivables, net
 
692,028

 
1,041,487

Inventories
 
62,600

 
109,536

Prepaid expenses and other
 
22,973

 
16,592

Total current assets
 
1,295,172

 
1,207,015

Net property and equipment, based on successful efforts method of accounting
 
14,436,112

 
14,497,726

Operating lease right-of-use assets
 
12,684

 
9,128

Other noncurrent assets
 
12,743

 
14,038

Total assets
 
$
15,756,711

 
$
15,727,907

 
 
 
 
 
Liabilities and equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable trade
 
$
673,669

 
$
629,264

Revenues and royalties payable
 
239,245

 
470,264

Accrued liabilities and other
 
160,596

 
230,368

Current portion of operating lease liabilities
 
6,243

 
3,695

Current portion of long-term debt
 
2,455

 
2,435

Total current liabilities
 
1,082,208

 
1,336,026

Long-term debt, net of current portion
 
5,964,589

 
5,324,079

Other noncurrent liabilities:
 
 
 
 
Deferred income tax liabilities, net
 
1,737,112

 
1,787,125

Asset retirement obligations, net of current portion
 
156,126

 
151,774

Operating lease liabilities, net of current portion
 
6,340

 
5,433

Other noncurrent liabilities
 
13,078

 
15,119

Total other noncurrent liabilities
 
1,912,656

 
1,959,451

Commitments and contingencies (Note 10)
 
 
 


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; 365,117,003 shares issued and outstanding at March 31, 2020; 371,074,036 shares issued and outstanding at December 31, 2019
 
3,651

 
3,711

Additional paid-in capital
 
1,157,866

 
1,274,732

Retained earnings
 
5,258,845

 
5,463,224

Total shareholders’ equity attributable to Continental Resources
 
6,420,362

 
6,741,667

Noncontrolling interests
 
376,896

 
366,684

Total equity
 
6,797,258

 
7,108,351

Total liabilities and equity
 
$
15,756,711

 
$
15,727,907


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 (Loss)
 
 
 
Three months ended March 31,
In thousands, except per share data
 
2020
 
2019
Revenues:
 
 
 
 
Crude oil and natural gas sales
 
$
862,743

 
$
1,109,584

Loss on natural gas derivatives, net
 

 
(1,124
)
Crude oil and natural gas service operations
 
18,058

 
15,774

Total revenues
 
880,801

 
1,124,234

 
 
 
 
 
Operating costs and expenses:
 
 
 
 
Production expenses
 
118,478

 
106,966

Production taxes
 
71,224

 
86,441

Transportation expenses
 
60,502

 
49,139

Exploration expenses
 
11,637

 
1,837

Crude oil and natural gas service operations
 
5,910

 
7,186

Depreciation, depletion, amortization and accretion
 
536,696

 
495,019

Property impairments
 
222,529

 
25,316

General and administrative expenses
 
42,911

 
47,617

Net (gain) loss on sale of assets and other
 
4,502

 
(252
)
Total operating costs and expenses
 
1,074,389

 
819,269

Income (loss) from operations
 
(193,588
)
 
304,965

Other income (expense):
 
 
 
 
Interest expense
 
(63,594
)
 
(67,837
)
Gain on extinguishment of debt
 
17,631

 

Other
 
532

 
1,355


 
(45,431
)
 
(66,482
)
Income (loss) before income taxes
 
(239,019
)
 
238,483

(Provision) benefit for income taxes
 
52,235

 
(51,990
)
Net income (loss)
 
(186,784
)
 
186,493

Net loss attributable to noncontrolling interests
 
(1,120
)
 
(483
)
Net income (loss) attributable to Continental Resources
 
$
(185,664
)
 
$
186,976

 
 
 
 
 
Net income (loss) per share attributable to Continental Resources:
 
 
 
 
Basic
 
$
(0.51
)
 
$
0.50

Diluted
 
$
(0.51
)
 
$
0.50

 
 
 
 
 
Comprehensive income (loss):
 
 
 
 
Net income (loss)
 
$
(186,784
)
 
$
186,493

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

 
116

Total other comprehensive income, net of tax
 

 
116

Comprehensive income (loss)
 
(186,784
)
 
186,609

Comprehensive loss attributable to noncontrolling interests
 
(1,120
)
 
(483
)
Comprehensive income (loss) attributable to Continental Resources
 
$
(185,664
)
 
$
187,092



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 months ended March 31, 2020
 
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, 2019
 
371,074,036

 
$
3,711

 
$
1,274,732

 
$

 
$

 
$
5,463,224

 
$
6,741,667

 
$
366,684

 
$
7,108,351

Net income (loss)
 

 

 

 

 

 
(185,664
)
 
(185,664
)
 
(1,120
)
 
(186,784
)
Cumulative effect adjustment from adoption of ASU 2016-13
 

 

 

 

 

 
(137
)
 
(137
)
 

 
(137
)
Cash dividends declared ($0.05 per share)
 

 

 

 

 

 
(18,580
)
 
(18,580
)
 

 
(18,580
)
Change in dividends payable
 

 

 

 

 

 
2

 
2

 

 
2

Common stock repurchased
 

 

 

 

 
(126,906
)
 

 
(126,906
)
 

 
(126,906
)
Common stock retired
 
(8,122,104
)
 
(81
)
 
(126,825
)
 

 
126,906

 

 

 

 

Stock-based compensation
 

 

 
16,411

 

 

 

 
16,411

 

 
16,411

Restricted stock:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Granted
 
2,454,235

 
24

 

 

 

 

 
24

 

 
24

Repurchased and canceled
 
(246,346
)
 
(2
)
 
(6,452
)
 

 

 

 
(6,454
)
 

 
(6,454
)
Forfeited
 
(42,818
)
 
(1
)
 

 

 

 

 
(1
)
 

 
(1
)
Contributions from noncontrolling interests
 

 

 

 

 

 

 

 
16,950

 
16,950

Distributions to noncontrolling interests
 

 

 

 

 

 

 

 
(5,618
)
 
(5,618
)
Balance at March 31, 2020
 
365,117,003

 
$
3,651

 
$
1,157,866

 
$

 
$

 
$
5,258,845

 
$
6,420,362

 
$
376,896

 
$
6,797,258



Three months ended March 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



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



Continental Resources, Inc. and Subsidiaries
Unaudited Condensed Consolidated Statements of Cash Flows
 
 
Three months ended March 31,
In thousands
 
2020
 
2019
Cash flows from operating activities
 
 
Net income (loss)
 
$
(186,784
)
 
$
186,493

Adjustments to reconcile net income (loss) to net cash provided by operating activities:
 
 
 
 
Depreciation, depletion, amortization and accretion
 
536,786

 
496,561

Property impairments
 
222,529

 
25,316

Non-cash loss on derivatives
 

 
14,186

Stock-based compensation
 
16,441

 
12,107

Provision (benefit) for deferred income taxes
 
(50,012
)
 
51,990

Dry hole costs
 
6,259

 

Net (gain) loss on sale of assets and other
 
4,502

 
(252
)
Gain on extinguishment of debt
 
(17,631
)
 

Other, net
 
2,911

 
3,683

Changes in assets and liabilities:
 
 
 
 
Accounts receivable
 
344,845

 
(78,027
)
Inventories
 
22,417

 
(14,742
)
Other current assets
 
(4,848
)
 
(5,786
)
Accounts payable trade
 
70,084

 
24,341

Revenues and royalties payable
 
(231,990
)
 
6,282

Accrued liabilities and other
 
(70,274
)
 
(563
)
Other noncurrent assets and liabilities
 
(1,417
)
 
(81
)
Net cash provided by operating activities
 
663,818

 
721,508

 
 
 
 
 
Cash flows from investing activities
 
 
 
 
Exploration and development
 
(673,191
)
 
(732,770
)
Purchase of producing crude oil and natural gas properties
 
(19,258
)
 
(15,849
)
Purchase of other property and equipment
 
(14,923
)
 
(4,951
)
Proceeds from sale of assets
 
633

 
499

Net cash used in investing activities
 
(706,739
)
 
(753,071
)
 
 
 
 
 
Cash flows from financing activities
 
 
 
 
Credit facility borrowings
 
1,130,000

 
100,000

Repayment of credit facility
 
(450,000
)
 
(100,000
)
Repurchase of senior notes
 
(22,527
)
 

Repayment of other debt
 
(603
)
 
(576
)
Contributions from noncontrolling interests
 
21,254

 
38,242

Distributions to noncontrolling interests
 
(5,212
)
 
(3,874
)
Repurchase of common stock
 
(126,906
)
 

Repurchase of restricted stock for tax withholdings
 
(6,454
)
 
(20,622
)
Dividends paid on common stock
 
(18,460
)
 

Net cash provided by financing activities
 
521,092

 
13,170

Effect of exchange rate changes on cash
 

 
15

Net change in cash and cash equivalents
 
478,171

 
(18,378
)
Cash and cash equivalents at beginning of period
 
39,400

 
282,749

Cash and cash equivalents at end of period
 
$
517,571

 
$
264,371


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


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.
The Company's operations in the North region comprised 58% of its crude oil and natural gas production and 69% of its crude oil and natural gas revenues for the three months ended March 31, 2020. 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 comprised 42% of its crude oil and natural gas production and 31% of its crude oil and natural gas revenues for the three months ended March 31, 2020. The Company's principal producing properties in the South region are located in the SCOOP and STACK areas of Oklahoma.
For the three months ended March 31, 2020, crude oil accounted for 56% of the Company’s total production and 90% 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 (loss) 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, 2019 (“2019 Form 10-K”), which includes a summary of the Company’s significant accounting policies and other disclosures.
The condensed consolidated financial statements as of March 31, 2020 and for the three month periods ended March 31, 2020 and 2019 are unaudited. The condensed consolidated balance sheet as of December 31, 2019 was derived from the audited balance sheet included in the 2019 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 (loss) per share is computed by dividing net income (loss) 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

5

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

following table presents the calculation of basic and diluted weighted average shares outstanding and net income (loss) per share attributable to the Company for the three months ended March 31, 2020 and 2019.
 
 
Three months ended March 31,
In thousands, except per share data
 
2020
 
2019
Net income (loss) attributable to Continental Resources (numerator)
 
$
(185,664
)
 
$
186,976

Weighted average shares (denominator):
 
 
 
 
Weighted average shares - basic
 
365,403

 
372,563

Non-vested restricted stock (1)
 

 
1,911

Weighted average shares - diluted
 
365,403

 
374,474

Net income (loss) per share attributable to Continental Resources:
 
 
 
 
Basic
 
$
(0.51
)
 
$
0.50

Diluted
 
$
(0.51
)
 
$
0.50


(1)
For the three months ended March 31, 2020 the Company had a net loss and therefore the potential dilutive effect of approximately 594,000 weighted average non-vested restricted shares were not included in the calculation of diluted net loss per share because to do so would have been anti-dilutive to the computation.
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 March 31, 2020 and December 31, 2019 consisted of the following:
In thousands
 
March 31, 2020
 
December 31, 2019
Tubular goods and equipment
 
$
15,853

 
$
14,880

Crude oil
 
46,747

 
94,656

Total
 
$
62,600

 
$
109,536


For the three months ended March 31, 2020, the Company recognized a $24.5 million impairment to reduce its crude oil inventory to estimated net realizable value at March 31, 2020. The impairment is included in the caption “Property impairments” in the unaudited condensed consolidated statements of comprehensive income (loss).
Adoption of new accounting pronouncement
On January 1, 2020 the Company adopted Accounting Standards Update ("ASU") 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. See Note 5. Allowance for Credit Losses for discussion of the adoption impact and the applicable disclosures required by the new standard.
New accounting pronouncement not yet adopted
In December 2019, the Financial Accounting Standards Board ("FASB") issued ASU 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes. This standard eliminates certain exceptions to the guidance in Topic 740 related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period, and the recognition of deferred tax liabilities for outside basis differences. The new guidance also clarifies certain aspects of the existing guidance, among other things. The standard is effective for interim and annual periods beginning after December 15, 2020 and shall be applied on either a prospective basis, a retrospective basis for all periods presented, or a modified retrospective basis through a cumulative-effect adjustment to retained earnings depending on which aspects of the new standard are applicable to an entity. 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.


6

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. 
 
 
Three months ended March 31,
In thousands
 
2020
 
2019
Supplemental cash flow information:
 
 
 
 
Cash paid for interest
 
$
51,111

 
$
61,964

Cash paid for income taxes
 
8

 
9

Cash received for income tax refunds (1)
 
9,485

 
4

Non-cash investing activities:
 
 
 
 
Asset retirement obligation additions and revisions, net
 
2,508

 
2,570


(1) Amount received in the 2020 period primarily represents alternative minimum tax refunds.

As of March 31, 2020 and December 31, 2019, the Company had $232.2 million and $262.7 million, respectively, of accrued capital expenditures included in “Net property and equipment” and “Accounts payable trade” in the condensed consolidated balance sheets.
As of March 31, 2020 and December 31, 2019, the Company had $1.3 million and $5.6 million, respectively, of accrued contributions from noncontrolling interests included in "ReceivablesJoint interest and other" and "EquityNoncontrolling interests" in the condensed consolidated balance sheets.
As of March 31, 2020 and December 31, 2019, the Company had $1.9 million and $1.5 million, respectively, of accrued distributions to noncontrolling interests included in "Revenues and royalties payable" and "EquityNoncontrolling interests" in the condensed consolidated balance sheets.
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 $50.4 million and $41.6 million for the three months ended March 31, 2020 and 2019, respectively.
Operated natural gas revenues – The Company sells the majority of its operated natural gas production to midstream customers at its lease locations based on market prices in the field where the sales occur. Under these arrangements, the midstream customers obtain control of the unprocessed gas stream at the lease location and the Company's revenues from each sale are determined using contractually agreed pricing formulas which contain multiple components, including the volume and Btu content of the natural gas sold, the midstream customer's proceeds from the sale of residue gas and natural gas liquids ("NGLs") at secondary downstream markets, and contractual pricing adjustments reflecting the midstream customer's estimated recoupment of its investment over time. Such revenues are recognized net of pricing adjustments applied by the midstream customer during the month in which control transfers to the customer at the delivery point and it is probable the Company will collect the consideration it is entitled to receive. Natural gas sales proceeds from operated properties are generally received by the Company within one month after the month in which a sale has occurred.
Under certain arrangements, the Company has the right to take a volume of processed residue gas and/or NGLs in-kind at the tailgate of the midstream customer's processing plant in lieu of a monetary settlement for the sale of the Company's operated natural gas production. The Company currently takes certain processed residue gas volumes in kind in lieu of monetary settlement, but does not currently take NGL volumes. When the Company elects to take volumes in kind, it pays third parties to

7

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

transport the processed products it took in-kind to downstream delivery points, where it then sells to customers at prices applicable to those downstream markets. In such situations, operated revenues are recognized during the month in which control transfers to the customer at the delivery point and it is probable the Company will collect the consideration it is entitled to receive. Operated sales proceeds are generally received by the Company within one month after the month in which a sale has occurred. In these scenarios, the Company's revenues include the pricing adjustments applied by the midstream processing entity according to the applicable contractual pricing formula, but exclude the transportation expenses the Company incurs to transport the processed products to downstream customers. Transportation expenses associated with these arrangements totaled $10.1 million and $7.5 million for the three months ended March 31, 2020 and 2019, respectively.
Non-operated crude oil and natural gas revenues – The Company's proportionate share of production from non-operated properties is generally marketed at the discretion of the operators. For non-operated properties, the Company receives a net payment from the operator representing its proportionate 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 to be received by the Company during the month in which production occurs and it is probable the Company will collect the consideration it is entitled to receive. Proceeds are generally received by the Company within two to three months after the month in which production occurs.
Revenues from derivative instruments – See Note 6. Derivative Instruments for discussion of the Company's accounting for its derivative instruments.
Revenues from service operations – Revenues from the Company's crude oil and natural gas service operations consist primarily of revenues associated with water gathering, recycling, and disposal activities and the treatment and sale of crude oil reclaimed from waste products. Revenues associated with such activities, which are derived using market-based rates or rates commensurate with industry guidelines, are recognized during the month in which services are performed, the Company has an unconditional right to receive payment, and collectability is probable. Payment is generally received by the Company within one month after the month in which services are provided.
Disaggregation of crude oil and natural gas revenues
The following tables present the disaggregation of the Company's crude oil and natural gas revenues for the three months ended March 31, 2020 and 2019.
 
 
Three months ended March 31, 2020
 
Three months ended March 31, 2019
In thousands
 
North Region
 
South Region
 
Total
 
North Region
 
South Region
 
Total
Crude oil revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Operated properties
 
$
448,930

 
$
179,176

 
$
628,106

 
$
585,605

 
$
136,547

 
$
722,152

Non-operated properties
 
132,939

 
12,725

 
145,664

 
178,728

 
10,238

 
188,966

Total crude oil revenues
 
581,869

 
191,901

 
773,770

 
764,333

 
146,785

 
911,118

Natural gas revenues:
 
 
 
 
 
 
 
 
 
 
 
 
Operated properties
 
11,588

 
72,306

 
83,894

 
51,461

 
124,698

 
176,159

Non-operated properties
 
1,720

 
3,359

 
5,079

 
10,866

 
11,441

 
22,307

Total natural gas revenues
 
13,308

 
75,665

 
88,973

 
62,327

 
136,139

 
198,466

Crude oil and natural gas sales
 
$
595,177

 
$
267,566

 
$
862,743

 
$
826,660

 
$
282,924

 
$
1,109,584

 
 
 
 
 
 

 
 
 
 
 
 
Timing of revenue recognition
 
 
 
 
 
 
 
 
 
 
 
 
Goods transferred at a point in time
 
$
595,177

 
$
267,566

 
$
862,743

 
$
826,660

 
$
282,924

 
$
1,109,584

Goods transferred over time
 

 

 

 

 

 

 
 
$
595,177

 
$
267,566

 
$
862,743

 
$
826,660

 
$
282,924

 
$
1,109,584


 
 
 
 
 
 
 
 
 
 
 
 
 

Performance obligations
The Company satisfies the performance obligations under its crude oil and natural gas sales contracts upon delivery of its production and related transfer of control to customers. Judgment may be required in determining the point in time when control transfers to customers. Upon delivery of production, the Company has a right to receive consideration from its customers in amounts determined by the sales contracts.

8

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

All of the Company's outstanding crude oil sales contracts at March 31, 2020 are short-term in nature with contract terms of less than one year. For such contracts, the Company has utilized the practical expedient in Accounting Standards Codification ("ASC") 606-10-50-14 exempting the Company from disclosure of the transaction price allocated to remaining performance obligations, if any, if the performance obligation is part of a contract that has an original expected duration of one year or less.
The majority of the Company's operated natural gas production is sold at lease locations to midstream customers under multi-year term contracts. For such contracts having a term greater than one year, the Company has utilized the practical expedient in ASC 606-10-50-14A which indicates an entity is not required to disclose the transaction price allocated to remaining performance obligations, if any, if variable consideration is allocated entirely to a wholly unsatisfied performance obligation. Under the Company's sales contracts, whether for crude oil or natural gas, each unit of production delivered to a customer represents a separate performance obligation; therefore, future volumes to be delivered are wholly unsatisfied at period-end and disclosure of the transaction price allocated to remaining performance obligations is not applicable.
Contract balances
Under the Company’s crude oil and natural gas sales contracts or activities that give rise to service revenues, the Company recognizes revenue after its performance obligations have been satisfied, at which point the Company has an unconditional right to receive payment. Accordingly, the Company’s commodity sales contracts and service activities generally do not give rise to contract assets or contract liabilities under ASC Topic 606. Instead, the Company's unconditional rights to receive consideration are presented as a receivable within "ReceivablesCrude oil and natural gas sales" or "ReceivablesJoint interest and other", as applicable, in its condensed consolidated balance sheets.
Revenues from previously satisfied performance obligations
To record revenues for commodity sales, at the end of each month the Company estimates the amount of production delivered and sold to customers and the prices to be received for such sales. Differences between estimated revenues and actual amounts received for all prior months are recorded in the month payment is received from the customer and are reflected in the financial statements within the caption "Crude oil and natural gas sales". Revenues recognized during the three months ended March 31, 2020 and 2019 related to performance obligations satisfied in prior reporting periods were not material.
Note 5. Allowance for Credit Losses
In June 2016, the FASB issued ASU 2016-13, Financial InstrumentsCredit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. This standard changes how entities measure credit losses for most financial assets and certain other instruments that are not measured at fair value through net income. The standard replaced the previously required incurred loss approach with a forward-looking expected credit loss model for accounts receivable and other financial instruments measured at amortized cost. The standard became effective for reporting periods beginning after December 15, 2019. The Company adopted the new standard on January 1, 2020 using a modified retrospective approach through a cumulative-effect adjustment to retained earnings as of the effective date. The Company's cumulative effect adjustment resulted in a $0.1 million decrease in retained earnings and corresponding decrease in receivables via the recognition of an incremental allowance for credit losses at January 1, 2020.
The Company's principal exposure to credit risk is through the sale of its crude oil and natural gas production and its receivables associated with billings to joint interest owners. Accordingly, the Company classifies its receivables into two portfolio segments as depicted on the condensed consolidated balance sheets as "ReceivablesCrude oil and natural gas sales” and "ReceivablesJoint interest and other.” Presented below are applicable disclosures required by ASU 2016-13 for each portfolio segment.

Historically, the Company's credit losses on receivables have been immaterial. The Company’s aggregate allowance for credit losses totaled $2.7 million and $2.4 million at March 31, 2020 and December 31, 2019, respectively, which is reported as "Allowance for credit losses" in the condensed consolidated balance sheets. Aggregate credit loss expenses totaled $0.7 million and $0.1 million for the three months ended March 31, 2020 and 2019, respectively, which is included in “General and administrative expenses” in the unaudited condensed consolidated statements of comprehensive income (loss).
Receivables—Crude oil and natural gas sales
The Company's crude oil and natural gas production from operated properties is generally sold to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies. The Company monitors its credit loss exposure to these counterparties primarily by reviewing credit ratings, financial statements, and payment history. Credit terms are extended based on an evaluation of each counterparty’s credit worthiness. The Company has not generally required its counterparties to provide collateral to secure its crude oil and natural gas sales receivables.

9

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

Receivables associated with crude oil and natural gas sales are short term in nature. Receivables from the sale of crude oil and natural gas from operated properties are generally collected within one month after the month in which a sale has occurred, while receivables associated with non-operated properties are generally collected within two to three months after the month in which production occurs.
The Company’s allowance for credit losses on crude oil and natural gas sales was less than $0.1 million at both March 31, 2020 and December 31, 2019. The allowance was determined by considering a number of factors, primarily including the Company’s history of credit losses with adjustment as needed to reflect current conditions, the length of time accounts are past due, whether amounts relate to operated properties or non-operated properties, and the counterparty's ability to pay. There were no significant write-offs, recoveries, or changes in the provision for credit losses on this portfolio segment during the three months ended March 31, 2020.
Receivables—Joint interest and other
Joint interest and other receivables primarily arise from billing the individuals and entities who own a partial interest in the wells we operate. Joint interest receivables are due within 30 days and are considered delinquent after 60 days. In order to minimize our exposure to credit risk with these counterparties we generally request prepayment of drilling costs where it is allowed by contract or state law. Such prepayments are used to offset future capital costs when billed, thereby reducing the Company's credit risk. We may have the right to place a lien on a co-owner's interest in the well, to net production proceeds against amounts owed in order to secure payment or, if necessary, foreclose on the co-owner's interest.
The Company’s allowance for credit losses on joint interest receivables totaled $2.7 million and $2.4 million at March 31, 2020 and December 31, 2019, respectively. The allowance was determined by considering a number of factors, primarily including the Company’s history of credit losses with adjustment as needed to reflect current conditions, the length of time accounts are past due, the ability to recoup amounts owed through netting of production proceeds, the balance of co-owner prepayments if any, and the co-owner's ability to pay. There were no significant write-offs, recoveries, or changes in the provision for credit losses on this portfolio segment during the three months ended March 31, 2020.

Note 6. Derivative Instruments
Natural gas derivatives
As of and for the three months ended March 31, 2019 the Company had outstanding natural gas derivative contracts to economically hedge against the variability in cash flows associated with sales of natural gas production. Such contracts matured in 2019 and the Company had no commodity derivative contracts outstanding at December 31, 2019 and March 31, 2020.
The Company recognizes its derivative instruments, if any, on the balance sheet as either assets or liabilities measured at fair value. The estimated fair value of derivatives is based upon various factors, including commodity exchange prices, over-the-counter quotations and, in the case of collars, volatility, the risk-free interest rate, and the time to expiration. Historically, the Company has not designated its derivatives as hedges for accounting purposes and, as a result, marked its derivative instruments to fair value and recognized the changes in fair value in the unaudited condensed consolidated statements of comprehensive income (loss) under the caption “Loss on natural gas derivatives, net”.
 
 
 
 
 
 
 
 
 
 
 
 
 


10

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

Natural gas derivative gains and losses
Cash receipts in the following table reflect the gain on derivative contracts which matured during the applicable period, calculated as the difference between the contract price and the market settlement price of matured contracts. The Company's 2019 natural gas derivatives were settled based upon reported NYMEX Henry Hub settlement prices. Non-cash losses below represent the change in fair value of derivative instruments which continued to be held at period end, if any, and the reversal of previously recognized non-cash gains or losses on derivative contracts that matured during the period.
 
 
Three months ended March 31,
In thousands
 
2020
 
2019
Cash received on derivatives:
 
 
 
 
Natural gas fixed price swaps
 
$

 
$
7,645

Natural gas collars
 

 
5,417

Cash received on derivatives, net
 

 
13,062

Non-cash loss on derivatives:
 
 
 
 
Natural gas fixed price swaps