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Continental Resources Reports Third Quarter 2015 Results

The following excerpt is from the company's SEC filing.

New Wells in STACK: Ladd 1-8-5XH Flows 2,181 Barrels of Oil Equivalent (Boe) per Day (79% Oil), and Marks 1-9-4XH Flows 994 Boe per Day (73% Oil)

Positive Revisions to 2015 Guidance: Lower Cash Costs and Increased Production

Debt and Credit Facility Changes Reduce Borrowing Costs While Increasing Liquidity

Production for Third Quarter 2015 Averaged 228,278 Boe per Day

Oklahoma City, November 4, 2015 Continental Resources, Inc. (NYSE: CLR) (Continental or the Company) today announced third quarter 2015 operating and financial results.

Continental reported a net loss of $82.4 million, or $0.22 per diluted share, for third quarter 2015. Adjusted net loss for third quarter 2015 was $43.5 million, or $0.12 per diluted share.

EBITDAX for third quarter 2015 was $472.2 million, compared with EBITDAX of $947.6 million for third quarter 2014. Definitions and reconciliations of adjusted net income and net loss, adjusted earnings per share and EBITDAX to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures can be found in the supporting tables at the conclusion of this press release.

This was another solid quarters performance, said Harold Hamm, Chairman and Chief Executive Officer. As expected, we continue to deliver on cost controls and operating efficiencies, while maintaining our exploration focus. We continued in the third quarter to improve across the board in the key metrics we control faster drill times, lower completed well costs, and strong well results from enhanced completions. On the financial side, we remain focused on balancing capital expenditures with cash flow.

We are very pleased with the performance of our two recent completions in STACK, said Jack Stark, President and Chief Operating Officer. Based on early results and our geologic model, we expect STACK will add significant value to the Company and to our shareholders.

2015 Guidance Update; Increased Production at Lower Cost

Based on continued strong well performance through the third quarter, the Company is increasing its production growth guidance to a range of 24% to 26% for 2015, compared with the earlier range of 19% to 23% growth over the previous year. Continental expects non-acquisition capital expenditures for fourth quarter 2015 will be in the range of $350 million to $400 million.

Continental is lowering 2015 guidance for production expense, general and administrative (G&A) expense and non-cash equity compensation expense per barrel of oil equivalent (Boe) of production, reflecting increased operating efficiencies companywide. Overall, the guidance on select costs for 2015 has been reduced by a total of $0.85 to $1.05 per Boe of production. Production expense is now expected to be in a range of $4.00 to $4.50 per Boe for the year, production tax is expected to be in a range of 7.5% to

8.0% of oil and gas revenue, and G&A expense is expected to be in a range of $1.70 to $2.00 per Boe. Non-cash equity compensation is expected to be $0.65 to $0.75 per Boe for the year. In addition, Continental is tightening its 2015 guidance range for oil differentials to $7.00 to $9.00 per barrel below the NYMEX daily average compared with the previous range of $7.00 to $10.00 per barrel.

December 2014

August 2015

Updated 2015

Production growth

16% to 20%

19% to 23%

24% to 26%

Production expense per Boe

$5.50 to $6.00

$4.75 to $5.25

Production tax (% of oil & gas revenue)

7.5% to 8.5%

7.5% to 8.0%

G&A expense per Boe

$2.00 to $2.50

$1.75 to $2.25

Non-cash equity compensation per Boe

$0.75 to $0.95

$0.70 to $0.80

Avg. price differential to NYMEX WTI crude oil (per barrel of oil)

($7.00) to ($10.00)

($7.00) to ($9.00)

A table with the Companys full 2015 guidance can be found at the conclusion of this release.

Continental plans to publish 2016 guidance in late December 2015 or early January 2016.

Cost Reductions and Efficiency Improvements

Continentals drilling and completion costs for most operated wells have declined on average approximately 25% since year-end 2014, due to lower service costs and operational efficiency gains. For the Bakken play, the current estimated drilling and completion cost has decreased to $7.0 million per operated well, compared with $9.6 million per operated well at year-end 2014. At these lower costs and targeted estimated ultimate recovery (EUR) of 800 MBoe per well, the Company has cut its finding cost in half since year-end 2014, doubling its capital efficiency. For the Woodford condensate play, the current estimated drilling and completion cost has decreased to $9.6 million per operated well, compared with $12.2 million per operated well at year-end 2014, based on a 7,500-foot lateral in the Companys development areas of the South Central Oklahoma Oil Province (SCOOP).

In the Northern Region during third quarter 2015, the Bakken drilling team set multiple new Continental performance records. For example, the Company reduced average drilling time for spud-to-total-depth (TD) by 15%, compared to the average for the first quarter. The average spud-to-TD time in third quarter 2015 was 15.0 days for a two-mile lateral, compared to 17.6 days in the first quarter and 16.6 days in the second quarter of this year. The most significant efficiency achievement came in average days to drill horizontal laterals. The Bakken drilling team in third quarter 2015 set several new lateral drilling records, the most recent drilled being a 9,495-foot lateral in 2.4 days. The Bakken team continues to drive down lease operating expenses, with per-well lease operating expense down 30% in third quarter 2015, compared with fourth quarter 2014. Annualized, this represents approximately $40 million of savings to Continental.

In the Southern Region during third quarter 2015, the drilling team also continued to set new Continental records, demonstrating the future potential for efficiency gains throughout the SCOOP and STACK plays. Leveraging the knowledge gained on the Poteet and Honeycutt density pilots, the SCOOP team was able to drill the Vanarkel density pilot in half the time per well of the first multi-well project.

On the Newy 8-25-24-13XH well, the SCOOP team set a Continental drilling record for spud-to-TD in 47 days, a 30% reduction in drilling time compared to nearby wells. This well also set a new Oklahoma depth record with a total measured depth of 26,196 feet. On the Kalsu 1-35-2-11XH, the Northwest Cana drilling team set a new Continental record for its Joint Development Agreement (JDA) area, drilling spud-to-TD in 40 days, a 50% reduction from nearby wells.

Third quarter 2015 net production totaled 21.0 million Boe, or 228,278 Boe per day, a sequential increase of 1% from second quarter 2015 and 25% higher than third quarter 2014. Total net production for the third quarter included 147,472 barrels of oil (Bo) per day (65% of production) and 484.8 million cubic feet (MMcf) of natural gas per day (35% of production). In third quarter 2015, sales volumes also totaled 21.0 million Boe, consistent with production for the quarter.

Fourth quarter 2015 daily production is expected to decline compared with third quarter. Continental expects to exit December 2015 with production of approximately 210,000 Boe per day. Continental is currently operating 23 rigs, including 8 rigs in the Bakken and 15 rigs in Oklahoma. The Company has recently added two completion crews in Oklahoma, bringing the total crew count to three. In the Bakken, Continental currently has no completion crews active.

The following table provides the Companys average daily production by region for the periods presented.

North Region:

North Dakota Bakken






Montana Bakken






Red River Units






South Region:






NW Cana






The Company continues to de-risk its leasehold position in the STACK play in Oklahoma.

Continental recently completed its second and third STACK wells, the Ladd 1-8-5XH and the Marks 1-9-4XH. Both wells targeted the Meramec reservoir in Blaine County, northwest of the Ludwig 1-22-15XH,

the Companys initial STACK well. The Ladd tested at an initial production rate of 2,181 Boe per day (79% oil) from a 9,742-foot lateral. The Marks tested at an initial production rate of 994 Boe per day (73% oil) from a 10,092-foot lateral.

Production from the previously announced Ludwig 1-22-15XH well continued to strengthen after it was initially reported last quarter, resulting in a 24-hour peak production rate of 2,782 Boe per day (76% oil).

Continental and others continue to successfully expand the productive footprint of STACK west into Blaine, Dewey and Custer counties, where the STACK reservoirs are thicker, over-pressured, and are delivering superior production rates, said Mr. Stark. More than 95% of our acreage lies in these counties, and approximately 60% is held by production.

The Company is drilling three additional STACK wells, with one well waiting on completion and expects to spud another two to three wells before year end. Continental has 146,300 net acres in the play. Continental currently has three operated drilling rigs in STACK.

SCOOP Woodford and Springer

In third quarter 2015, total SCOOP net production averaged 69,136 Boe per day, an increase of 11% sequentially compared with second quarter 2015 and 90% compared with third quarter 2014. SCOOP production represented 30% of the Companys total production in third quarter 2015, compared with 20% of Company production for third quarter 2014.

During third quarter 2015, the Company completed 11 net (34 gross) operated and non-operated wells, while operating an average of eight rigs in SCOOP. Continentals activities in SCOOP are primarily focused on the Woodford formation and Springer formation, which is located approximately 1,000 to 1,500 feet above the Woodford. Current drilling is focused on the Woodford formation.

Continental currently has 28 gross operated wells drilled and waiting on first production in SCOOP Woodford and Springer...