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, 2024

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

____________________________________

 

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)

(405) 234-9000

(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: None

____________________________________

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 ¨ No x

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		☐		Accelerated filer		☐
Non-accelerated filer		x		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

As of March 31, 2024, there are no publicly traded common shares of Continental Resources, Inc.

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Table of Contents

PART I. Financial Information
Item 1.	Financial Statements	1
	Condensed Consolidated Balance Sheets	1
	Unaudited Condensed Consolidated Statements of Income	2
	Unaudited Condensed Consolidated Statements of Equity	3
	Unaudited Condensed Consolidated Statements of Cash Flows	4
	Notes to Unaudited Condensed Consolidated Financial Statements	5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	13
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	21
Item 4.	Controls and Procedures	22
PART II. Other Information
Item 1.	Legal Proceedings	23
Item 1A.	Risk Factors	23
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	23
Item 3.	Defaults Upon Senior Securities	23
Item 4.	Mine Safety Disclosures	23
Item 5.	Other Information	23
Item 6.	Exhibits	24
	Signature	25
When we refer to “us,” “we,” “our,” “Company,” or “Continental” we are describing Continental Resources, Inc. and our subsidiaries.

 

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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.

“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.

“NGL” or “NGLs” Refers to natural gas liquids, which are hydrocarbon products that are separated during natural gas processing and include ethane, propane, isobutane, normal butane, and natural gasoline.

“NYMEX” The New York Mercantile Exchange.

“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.

 

 

 

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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:

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, 2023, and other announcements we make from time to time.

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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. Additionally, new factors emerge from time to time, and it is not possible for us to predict all such factors. Should one or more of the risks or uncertainties described in this report or our Annual Report on Form 10-K for the year ended December 31, 2023 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.

 

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PART I. Financial Information

ITEM 1. Financial Statements

 

Continental Resources, Inc. and Subsidiaries

Condensed Consolidated Balance Sheets

 

		March 31, 2024				December 31, 2023
In thousands, except par values and share data		(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	219,664			$	26,397
Receivables:
Crude oil, natural gas, and natural gas liquids sales			1,228,233				1,196,262
Joint interest and other			302,009				350,907
Allowance for credit losses			(3,731	)			(3,172	)
Receivables, net			1,526,511				1,543,997
Derivative assets			216,385				353,261
Inventories			218,383				190,762
Prepaid expenses and other			36,554				33,450
Total current assets			2,217,497				2,147,867
Net property and equipment, based on successful efforts method of accounting			19,822,519				19,786,889
Investment in unconsolidated affiliates			247,804				240,484
Operating lease right-of-use assets			34,560				38,656
Derivative assets, noncurrent			142,545				155,252
Other noncurrent assets			21,120				18,293
Total assets		$	22,486,045			$	22,387,441
Liabilities and equity
Current liabilities:
Accounts payable trade		$	824,616			$	835,012
Revenues and royalties payable			730,385				768,381
Accrued liabilities and other			283,609				354,537
Current portion of incentive compensation liability			46,450				130,583
Current portion of income tax liabilities			190,061				84,556
Derivative liabilities			58,858				—
Current portion of operating lease liabilities			15,377				18,112
Current portion of long-term debt			895,437				895,105
Total current liabilities			3,044,793				3,086,286
Long-term debt, net of current portion			5,424,983				5,734,007
Other noncurrent liabilities:
Deferred income tax liabilities, net			2,879,099				2,867,283
Incentive compensation liability, noncurrent			17,032				41,707
Asset retirement obligations, noncurrent			404,945				391,957
Derivative liabilities, noncurrent			534				586
Operating lease liabilities, noncurrent			18,101				19,482
Other noncurrent liabilities			51,840				36,346
Total other noncurrent liabilities			3,371,551				3,357,361
Commitments and contingencies (Note 8)
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
299,610,267 shares issued and outstanding at March 31, 2024 and December 31, 2023			2,996				2,996
Retained earnings			10,277,821				9,850,687
Total shareholders’ equity attributable to Continental Resources			10,280,817				9,853,683
Noncontrolling interests			363,901				356,104
Total equity			10,644,718				10,209,787
Total liabilities and equity		$	22,486,045			$	22,387,441

 

 

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Continental Resources, Inc. and Subsidiaries

Unaudited Condensed Consolidated Statements of Income

		Three months ended March 31,
In thousands, except per share data		2024				2023
Revenues:
Crude oil, natural gas, and natural gas liquids sales		$	1,909,843			$	1,791,720
Gain (loss) on derivative instruments, net			(113,194	)			382,779
Crude oil and natural gas service operations			23,895				19,354
Total revenues			1,820,544				2,193,853
Operating costs and expenses:
Production expenses			188,697				181,986
Production and ad valorem taxes			147,127				136,175
Transportation, gathering, processing, and compression			107,946				77,869
Exploration expenses			4,110				3,378
Crude oil and natural gas service operations			26,640				17,832
Depreciation, depletion, amortization and accretion			632,763				476,454
Property impairments			12,062				13,074
General and administrative expenses			82,282				63,271
Net (gain) loss on sale of assets and other			(287	)			(186	)
Total operating costs and expenses			1,201,340				969,853
Income from operations			619,204				1,224,000
Other income (expense):
Interest expense			(79,811	)			(99,681	)
Other			3,154				1,754
			(76,657	)			(97,927	)
Income before income taxes			542,547				1,126,073
Provision for income taxes			(114,054	)			(239,756	)
Income before equity in net loss of affiliate			428,493				886,317
Equity in net loss of affiliate			(907	)			(663	)
Net income			427,586				885,654
Net income attributable to noncontrolling interests			464				1,357
Net income attributable to Continental Resources		$	427,122			$	884,297

 

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Three Months Ended March 31, 2024
		Shareholders’ equity attributable to Continental Resources
In thousands, except share data		Shares outstanding				Common stock				Retained earnings				Total shareholders’ equity of Continental Resources				Noncontrolling interests				Total equity
Balance at December 31, 2023			299,610,267			$	2,996			$	9,850,687			$	9,853,683			$	356,104			$	10,209,787
Net income			—				—				427,122				427,122				464				427,586
Change in dividends payable			—				—				12				12				—				12
Contributions from noncontrolling interests			—				—				—				—				14,040				14,040
Distributions to noncontrolling interests			—				—				—				—				(6,707	)			(6,707	)
Balance at March 31, 2024			299,610,267			$	2,996			$	10,277,821			$	10,280,817			$	363,901			$	10,644,718

 

 

Three Months Ended March 31, 2023
		Shareholders’ equity attributable to Continental Resources
In thousands, except share data		Shares outstanding				Common stock				Retained earnings				Total shareholders’ equity of Continental Resources				Noncontrolling interests				Total equity
Balance at December 31, 2022			299,610,267			$	2,996			$	6,754,174			$	6,757,170			$	372,438			$	7,129,608
Net income			—				—				884,297				884,297				1,357				885,654
Change in dividends payable			—				—				616				616				—				616
Contributions from noncontrolling interests			—				—				—				—				2,526				2,526
Distributions to noncontrolling interests			—				—				—				—				(10,432	)			(10,432	)
Balance at March 31, 2023			299,610,267			$	2,996			$	7,639,087			$	7,642,083			$	365,889			$	8,007,972

 

 

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		Three months ended March 31,
In thousands		2024				2023
Cash flows from operating activities
Net income		$	427,586			$	885,654
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, depletion, amortization and accretion			636,659				479,602
Property impairments			12,062				13,074
Non-cash (gain) loss on derivatives			208,390				(331,089	)
Provision for deferred income taxes			11,816				100,693
Equity in net loss of affiliate			907				663
Net (gain) loss on sale of assets and other			(287	)			(186	)
Other, net			23,567				3,988
Changes in assets and liabilities:
Accounts receivable			23,062				253,744
Inventories			(27,564	)			(19,669	)
Other current assets			(1,331	)			(3,191	)
Accounts payable trade			27,166				61,761
Revenues and royalties payable			(39,001	)			(223,212	)
Accrued liabilities and other			(70,148	)			(66,745	)
Incentive compensation liability			(108,809	)			(129,362	)
Current income taxes liability			105,504				139,063
Other noncurrent assets and liabilities			(7,701	)			(14,950	)
Net cash provided by operating activities			1,221,878				1,149,838
Cash flows from investing activities
Exploration and development			(663,003	)			(863,989	)
Purchase of producing crude oil and natural gas properties			(870	)			(97,550	)
Purchase of other property and equipment			(49,963	)			(60,374	)
Proceeds from sale of assets			4,340				1,223
Contributions to unconsolidated affiliates			(8,227	)			—
Net cash used in investing activities			(717,723	)			(1,020,690	)
Cash flows from financing activities
Credit facility borrowings			749,000				1,073,000
Repayment of credit facility			(959,000	)			(1,272,000	)
Repayment of other debt			(100,616	)			(597	)
Debt issuance costs			—				(241	)
Contributions from noncontrolling interests			7,740				1,872
Distributions to noncontrolling interests			(5,681	)			(11,354	)
Dividends paid on common stock			(2,331	)			(2,051	)
Net cash used in financing activities			(310,888	)			(211,371	)
Net change in cash and cash equivalents			193,267				(82,223	)
Cash and cash equivalents at beginning of period			26,397				137,788
Cash and cash equivalents at end of period		$	219,664			$	55,565

 

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and our historical consolidated financial statements and notes included in our Form 10-K for the year ended December 31, 2023.

The following discussion and analysis includes forward-looking statements and should be read in conjunction with the risk factors described in Part II, Item 1A. Risk Factors included in this report, if any, and in our Form 10-K for the year ended December 31, 2023, along with Cautionary Statement for the Purpose of the “Safe Harbor” Provisions of the Private Securities Litigation Reform Act of 1995 at the beginning of this report, for information about the risks and uncertainties that could cause our actual results to be materially different than our forward-looking statements.

Overview

We are an independent crude oil and natural gas company engaged in the exploration, development, management, and production of crude oil and natural gas and associated products with properties primarily located in four leading basins in the United States – the Bakken field of North Dakota and Montana, the Anadarko Basin of Oklahoma, the Permian Basin of Texas, and the Powder River Basin of Wyoming. Additionally, we pursue the acquisition and management of perpetually owned minerals located in certain of our key operating areas. We derive the majority of our operating income and cash flows from the sale of crude oil, natural gas, and natural gas liquids and expect this to continue in the future. Our corporate internet website is www.clr.com. As discussed in Note 1. Organization and Nature of Business—Voluntary Filer in Notes to Unaudited Condensed Consolidated Financial Statements, Continental Resources, Inc. is a privately held corporation and has no publicly available common shares outstanding.

First Quarter 2024 Financial and Operating Metrics

Commodity prices have remained volatile due to various factors, some of which include global supply and demand, global inventory levels, and regional conflicts. Average NYMEX oil prices for the three months ended March 31, 2024 and 2023 were $77.04 and $76.05, respectively. Average NYMEX gas prices for the three months ended March 31, 2024 and 2023 were $2.23 and $3.43, respectively. The following table contains financial and operating metrics for the first quarter periods of 2024 and 2023. Average sales prices exclude any effect of derivative transactions. Per-unit expenses have been calculated using sales volumes.

 

		Three months ended March 31,
		2024				2023
Average daily production:
Crude oil (Bbl per day)			237,908				206,232
Natural gas (Mcf per day) (1)			1,204,433				1,205,772
Crude oil equivalents (Boe per day)			438,647				407,194
Average sales prices:
Crude oil ($/Bbl)		$	75.96			$	75.77
Natural gas ($/Mcf) (1)		$	2.51			$	3.74
Production expenses ($/Boe)		$	4.74			$	5.00
Production and ad valorem taxes (% of net crude oil and natural gas sales)			8.2	%			7.9	%
Depreciation, depletion, amortization and accretion ($/Boe)		$	15.90			$	13.10
Total general and administrative expenses ($/Boe)		$	2.07			$	1.74

 

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Three months ended March 31, 2024 compared to the three months ended March 31, 2023

Results of Operations

The following table presents selected financial and operating information for the periods presented.

 

		Three months ended March 31,
In thousands		2024				2023
Crude oil, natural gas, and natural gas liquids sales		$	1,909,843			$	1,791,720
Gain (loss) on derivative instruments, net			(113,194	)			382,779
Crude oil and natural gas service operations			23,895				19,354
Total revenues			1,820,544				2,193,853
Operating costs and expenses			(1,201,340	)			(969,853	)
Other expenses, net			(76,657	)			(97,927	)
Income before income taxes			542,547				1,126,073
Provision for income taxes			(114,054	)			(239,756	)
Income before equity in net loss of affiliate			428,493				886,317
Equity in net loss of affiliate			(907	)			(663	)
Net income			427,586				885,654
Net income attributable to noncontrolling interests			464				1,357
Net income attributable to Continental Resources		$	427,122			$	884,297
Production volumes:
Crude oil (MBbl)			21,650				18,561
Natural gas (MMcf)			109,603				108,519
Crude oil equivalents (MBoe)			39,917				36,647
Sales volumes:
Crude oil (MBbl)			21,524				18,286
Natural gas (MMcf)			109,603				108,519
Crude oil equivalents (MBoe)			39,791				36,372

 

Production

The following table summarizes the changes in our average daily Boe production by major operating area for the first quarter period.

 

Boe production per day		1Q 2024				1Q 2023				% Change
Bakken			201,466				179,280				12	%
Anadarko Basin			141,745				152,554				(7	)%
Powder River Basin			26,539				23,333				14	%
Permian Basin			63,489				46,152				38	%
All other			5,408				5,875				(8	)%
Total			438,647				407,194				8	%

 

The following table summarizes the changes in our production by product for the first quarter period.

 

		Three months ended March 31,																				Volume
		2024								2023								Volume				percent
		Volume				Percent				Volume				Percent				increase				increase
Crude oil (MBbl)			21,650				54	%			18,561				51	%			3,089				17	%
Natural gas (MMcf)			109,603				46	%			108,519				49	%			1,084				1	%
Total (MBoe)			39,917				100	%			36,647				100	%			3,270				9	%

 

The 17% increase in crude oil production in the 2024 first quarter was primarily driven by new well completions in the Permian Basin and Powder River Basin over the past year, which contributed to an increase in our 2024 first quarter production by 1,371 MBbls, or 30%, compared to the 2023 first quarter. Additionally, our crude oil production in the Bakken field increased 1,225 MBbls, or 11%, and our crude oil production in the Anadarko Basin increased 530 MBbls, or 20%, in the 2024 first quarter due to new well completions over the past year.

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The 1% increase in natural gas production in the 2024 first quarter was driven in part by new well completions in the Permian Basin and Powder River Basin, which contributed to an increase of 3,405 MMcf, or 34%, compared to the prior period. Additionally, natural gas production in the Bakken field increased 5,839 MMcf, or 18%, compared to the 2023 first quarter. These increases were partially offset by a 8,159 MMcf, or 12%, decrease in natural gas production in the Anadarko Basin due to allocation of capital to oil-weighted projects in the basin as well as variation in the timing of new well completions between years.

Revenues

Our revenues consist of sales of crude oil, natural gas, and natural gas liquids, gains and losses resulting from changes in the fair value of our derivative instruments, and revenues associated with crude oil and natural gas service operations.

Crude oil, natural gas, and natural gas liquids sales. Sales totaled $1.91 billion for the first quarter of 2024, a 7% increase compared to sales of $1.79 billion for the 2023 first quarter due to increases in sales volumes and crude oil pricing, partially offset by a decrease in natural gas pricing.

Total sales volumes for the first quarter of 2024 increased 3,419 MBoe, or 9%, compared to the 2023 first quarter due to additional drilling and completion activities. For the first quarter of 2024, our crude oil sales volumes increased 18% and our natural gas sales volumes increased 1% compared to the 2023 first quarter.

Our crude oil sales prices averaged $75.96 per barrel in the 2024 first quarter compared to $75.77 per barrel for the 2023 first quarter.

Our natural gas sales prices averaged $2.51 per Mcf for the 2024 first quarter compared to $3.74 per Mcf for the 2023 first quarter.

Derivatives. Changes in settled and future commodity prices during the first quarter of 2024 resulted in overall negative revenue adjustments totaling $113.2 million for the period, representing $95.2 million of cash gains more than offset by $208.4 million of unsettled non-cash losses, compared to overall positive revenue adjustments totaling $382.8 million in the first quarter of 2023.

Operating Costs and Expenses

Production Expenses. Production expenses increased $6.7 million, or 4%, to $188.7 million for the first quarter of 2024 compared to $182.0 million for the first quarter of 2023 due to an increase in the number of producing wells from drilling activities over the past year. Production expenses on a per-Boe basis averaged $4.74 per Boe for the 2024 first quarter compared to $5.00 per Boe for the 2023 first quarter. The decrease in per-Boe costs is primarily due to higher sales volumes coupled with continued efforts to reduce cost of supply and inflation impacts in comparison to the prior period.

Production and Ad Valorem Taxes. Production and ad valorem taxes increased $10.9 million, or 8%, to $147.1 million for the first quarter of 2024 compared to $136.2 million for the first quarter of 2023 due to the previously described increase in crude oil and natural gas revenues. Our production taxes as a percentage of net sales averaged 8.2% for the first quarter of 2024, an increase compared to 7.9% for the first quarter of 2023. This increase was the result of changes in sales mix of crude oil and natural gas in the Company’s operating areas between periods.

Depreciation, Depletion, Amortization and Accretion. Total DD&A increased $156.3 million, or 33%, to $632.8 million for the first quarter of 2024 compared to $476.5 million for the first quarter of 2023 due to the previously described 9% increase in total sales volumes coupled with an increase in our DD&A rate per Boe as further discussed below. The following table shows the components of our DD&A on a unit of sales basis for the periods presented.

 

		Three months ended March 31,
$/Boe		2024				2023
Crude oil and natural gas		$	15.27			$	12.57
Other equipment			0.49				0.43
Asset retirement obligation accretion			0.14				0.10
Depreciation, depletion, amortization and accretion		$	15.90			$	13.10

 

Estimated proved reserves are a key component in our computation of DD&A expense. Proved reserves are determined using the unweighted arithmetic average of the first-day-of-the-month commodity prices for the preceding twelve months as required by SEC

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rules. Holding all other factors constant, if proved reserves are revised downward due to commodity price declines or other reasons, the rate at which we record DD&A expense increases. Conversely, if proved reserves are revised upward, the rate at which we record DD&A expense decreases.

Our proved reserves have been revised downward over the past year prompted by decreases in first-day-of-the-month commodity prices and other factors, which resulted in an increase in our DD&A rate for crude oil and natural gas properties in the first quarter of 2024 compared to the first quarter of 2023.

Property Impairments. Total property impairments decreased $1.0 million to $12.1 million for the first quarter of 2024 compared to $13.1 million for the first quarter of 2023. Amortization of undeveloped leasehold costs remained fairly consistent in the first quarter of 2024 in comparison to the prior period.

General and Administrative Expenses. Total G&A expenses increased $19.0 million, or 30%, to $82.3 million for the first quarter of 2024 compared to $63.3 million for the first quarter of 2023.

Total G&A expenses include charges for long-term incentive compensation awards of $32.5 million and $1.0 million for the first quarters of 2024 and 2023, respectively. This increase is primarily due to an increase in estimated incentive compensation payment obligations arising from changes in the value of the Company awards as of March 31, 2024 compared to the March 31, 2023 valuation date, coupled with a greater amount of forfeiture reversals of expense during the 2023 period.

G&A expenses other than incentive compensation awards totaled $49.8 million for the 2024 first quarter, a decrease of $12.5 million compared to $62.3 million for the 2023 first quarter primarily due to changes in the nature and timing of employee-related costs and benefits recognized between periods.

The following table shows the components of G&A expenses on a unit of sales basis for the periods presented.
 

		Three months ended March 31,
$/Boe		2024				2023
General and administrative expenses		$	1.25			$	1.71
Long-term incentive compensation awards			0.82				0.03
Total general and administrative expenses		$	2.07			$	1.74

Interest Expense. Interest expense decreased $19.9 million, or 20%, to $79.8 million for the first quarter of 2024 compared to $99.7 million for the first quarter of 2023 due to a decrease in our weighted average outstanding debt balance from $8.2 billion for the first quarter of 2023 to $6.6 billion for the first quarter of 2024. This decrease was driven by debt reduction throughout the past year, including the redemption of our $636 million senior notes on April 15, 2023 coupled with no amounts outstanding under our credit facility as of March 31, 2024 compared to $961 million outstanding as of March 31, 2023.

Income Taxes. For the first quarters of 2024 and 2023 we provided for income taxes at a combined federal and state tax rate of 23.5% of our pre-tax income. We recorded an income tax provision of $114.1 million for the 2024 first quarter and an income tax provision of $239.8 million for the 2023 first quarter, which resulted in effective tax rates of 21.0% and 21.3%, respectively, after taking into account the application of statutory tax rates, permanent taxable differences, estimated tax credits, and other items.

Liquidity and Capital Resources

Our primary sources of liquidity have historically been cash flows generated from operating activities, financing provided by our credit facility and the issuance of debt securities. Additionally, asset dispositions and joint development arrangements have provided a source of cash flow for use in reducing debt and enhancing liquidity.

In April 2024, we repaid the outstanding $650 million term loan balance using available cash on-hand and credit facility borrowings. As of April 30, 2024, the term loan was fully repaid and the balance on the credit facility was $490 million, with borrowing availability of $1.8 billion. Our credit facility, which is unsecured and has no borrowing base subject to redetermination, does not mature until October 2026.

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Based on our planned capital spending, our forecasted cash flows and projected levels of indebtedness, we expect to maintain compliance with the covenants under our credit facility and senior note indentures. Further, based on current market indications, we expect to meet our contractual cash commitments to third parties as of March 31, 2024, including those subsequently described under the heading Future Capital Requirements, recognizing we may be required to meet such commitments even if our business plan assumptions were to change. We monitor our capital spending closely based on actual and projected cash flows and have the ability to reduce spending or dispose of assets if needed to preserve liquidity and financial flexibility to fund our operations.

Cash Flows

Cash flows from operating activities

Net cash provided by operating activities increased $72.0 million, or 6%, to $1.22 billion for the first quarter of 2024 compared to $1.15 billion for the first quarter of 2023. The increase was driven by a $118.1 million increase in crude oil, natural gas, and NGL revenues due to the previously described increase in sales volumes, which was partially offset by an increase in certain cash operating expenses associated with higher sales volumes over the past year. Increased cash operating expenses included a $6.7 million increase in production expenses, a $30.1 million increase in transportation, gathering, processing, and compression expenses, and an $11.0 million increase in production and ad valorem taxes. Additionally, our realized cash gains on matured commodity derivatives increased $43.5 million compared to the prior period.

Cash flows from investing activities

Net cash used in investing activities totaled $717.7 million for the first quarter of 2024, a decrease of $303.0 million, or 30%, from $1.02 billion for the first quarter of 2023. Our investing cash flows for first quarter 2024 included $663.0 million of exploration and development costs compared to $864.0 million for first quarter 2023, reflecting changes in the timing of our capital spending between periods. For full year 2024 our capital expenditures budget attributable to us is $3.4 billion compared to $3.3 billion of non-acquisition capital spending in full year 2023. Additionally, we had lower acquisitions of producing crude oil and natural gas properties, with $0.9 million acquired in first quarter of 2024 compared to $97.6 million acquired in first quarter of 2023.

Cash flows from financing activities

Net cash used in financing activities for the first quarter of 2024 totaled $311 million, primarily consisting of $210 million of net repayments on our credit facility and a $100 million repayment of our term loan due in November 2025.

Net cash used in financing activities for the first quarter of 2023 totaled $211 million, primarily consisting of $199 million of net repayments on our credit facility and $11 million of cash distributed to noncontrolling interests.

Future Sources of Financing

Although we cannot provide any assurance, we believe funds from operating cash flows, our cash balance, and availability under our credit facility should be sufficient to meet our normal operating needs, debt service obligations, budgeted capital expenditures, and cash payments for income taxes for at least the next 12 months and to meet our contractual cash commitments to third parties described under the heading Future Capital Requirements beyond 12 months.

Based on current market indications supported by cash flow protection provided by our hedge portfolio against commodity price declines, our budgeted capital spending plans for 2024 are expected to be funded from operating cash flows. Any deficiencies in operating cash flows relative to budgeted spending are expected to be funded by borrowings under our credit facility. If cash flows are materially impacted by declines in commodity prices, we have the ability to reduce our capital expenditures or utilize the availability of our credit facility if needed to fund our operations.

We may choose to access banking or debt capital markets for additional financing or capital to fund our operations or take advantage of business opportunities that may arise. Further, we may sell assets or enter into strategic joint development opportunities in order to obtain funding if such transactions can be executed on satisfactory terms. However, no assurance can be given that such transactions will occur.

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Credit facility

We have an unsecured credit facility, maturing in October 2026, with aggregate lender commitments totaling $2.255 billion. The commitments are from a syndicate of 13 banks and financial institutions. We believe each member of the current syndicate has the capability to fund its commitment.

The commitments under our credit facility are not dependent on a borrowing base calculation subject to periodic redetermination based on changes in commodity prices and proved reserves. Additionally, downgrades or other negative rating actions with respect to our credit rating do not trigger a reduction in our current credit facility commitments, nor do such actions trigger a security requirement or change in covenants.

Our credit facility contains restrictive covenants that may limit our ability to, among other things, incur additional indebtedness, incur liens, engage in sale and leaseback transactions, or merge, consolidate or sell all or substantially all of our assets. Our credit facility also contains a requirement that we maintain a consolidated net debt to total capitalization ratio of no greater than 0.65 to 1.00. See Notes to Unaudited Condensed Consolidated Financial Statements–Note 7. Debt for a discussion of how this ratio is calculated pursuant to our credit agreement.

We were in compliance with our credit facility covenants at March 31, 2024 and expect to maintain compliance. At March 31, 2024, our consolidated net debt to total capitalization ratio was 0.34. We do not believe the credit facility covenants are reasonably likely to limit our ability to undertake additional debt financing if needed to support our business.

Future Capital Requirements

Our material future cash requirements are summarized below. Based on current market indications, we expect to meet our contractual cash commitments to third parties as of March 31, 2024, recognizing we may be required to meet such commitments even if our business plan assumptions were to change.

Senior notes

Our debt includes outstanding senior note obligations totaling $5.7 billion at April 30, 2024, exclusive of interest payment obligations thereon. Our senior notes are not subject to any mandatory redemption or sinking fund requirements. The earliest scheduled senior note maturity is our $893 million of 2024 Notes due on June 1, 2024, which is reflected as a current liability in the caption “Current portion of long-term debt” in the condensed consolidated balance sheet. We plan to fully redeem our 2024 Notes by the June 1, 2024 maturity date using a combination of available cash and utilization of credit facility borrowing capacity. For further information on the face values, maturity dates, semi-annual interest payment dates, optional redemption periods and covenant restrictions related to our senior notes, refer to Note 7. Debt in Notes to Unaudited Condensed Consolidated Financial Statements.

We were in compliance with our senior note covenants at March 31, 2024 and expect to maintain compliance. We do not believe the senior note covenants will materially limit our ability to undertake additional debt financing. Downgrades or other negative rating actions with respect to the credit ratings assigned to our senior unsecured debt do not trigger additional senior note covenants.

Credit facility borrowings

As of April 30, 2024, we had $490 million of outstanding borrowings on our credit facility. Our credit facility matures in October 2026.

Transportation, gathering, and processing commitments

We have entered into transportation, gathering, and processing commitments to guarantee capacity on crude oil and natural gas pipelines and natural gas processing facilities that require us to pay per-unit charges regardless of the amount of capacity used. Future commitments remaining as of March 31, 2024 under the arrangements amount to approximately $1.04 billion. See Note 8. Commitments and Contingencies in Notes to Unaudited Condensed Consolidated Financial Statements for additional information.

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Capital expenditures

Our capital expenditures budget for 2024 is expected to be $3.4 billion. Costs of acquisitions and investments are not budgeted, with the exception of planned levels of spending for mineral acquisitions.

For the three months ended March 31, 2024, we invested $657.9 million in our capital program excluding $4.8 million of unbudgeted acquisitions and $13.8 million of mineral acquisitions attributable to Franco-Nevada.

Our drilling and completion activities and the actual amount and timing of our capital expenditures may differ materially from our budget as a result of, among other things, available cash flows, unbudgeted acquisitions, actual drilling and completion results, operational process improvements, the availability of drilling and completion rigs and other services and equipment, cost inflation, the availability of transportation, gathering and processing capacity, changes in commodity prices, and regulatory, technological and competitive developments. We monitor our capital spending closely based on actual and projected cash flows and may adjust our spending should commodity prices materially change from current levels. We expect to continue participating as a buyer of properties when and if we have the ability to increase our position in strategic plays at attractive terms.

Cash payments for income taxes

During April 2024, we made cash payments for federal and state income taxes totaling $213 million, representing payments associated with 2023 tax return filing extensions and estimated quarterly payments for 2024 federal and state income taxes based on estimates of taxable income for 2024. Significant judgment is involved in estimating future taxable income as we are required to make assumptions about future commodity prices, projected production, development activities, capital spending, profitability, and general economic conditions, all of which are subject to material revision in future periods as better information becomes available. If commodity prices remain at current levels, we expect to continue generating significant taxable income through at least year-end 2024, which would result in us continuing to make estimated tax payments on a quarterly basis in 2024. Because of the significant uncertainty inherent in numerous factors utilized in projecting taxable income, we cannot predict the amount of future income tax payments with certainty.

Long-term incentive compensation awards

At December 31, 2023 we had recognized a current liability of $131 million on the condensed consolidated balance sheet associated with unvested incentive compensation awards granted to employees, which was subsequently paid in cash to employees in February 2024 upon the scheduled vesting of the awards. We granted additional incentive compensation awards in the 2024 first quarter and intend to continue granting additional awards on an annual basis that we plan to settle in cash upon vesting.

At March 31, 2024 we have recognized a current liability of $46.5 million and a non-current liability of $17.0 million associated with unvested awards granted to employees that are scheduled to vest in 2025, 2026, and 2027. Our recognized liabilities will be remeasured each reporting period leading up to the applicable award vesting dates to reflect additional services rendered by employees and to reflect changes in expected cash payments arising from underlying changes in the value of the Company based on independent third party appraisals.

Derivative Instruments

The fair value of our derivative instruments at March 31, 2024 was a net asset of $299.5 million. See Note 5. Derivative Instruments in Notes to Unaudited Condensed Consolidated Financial Statements for further discussion of our hedging activities, including a summary of derivative contracts in place as of March 31, 2024. The estimated fair value of our derivatives is highly sensitive to market price volatility and therefore subject to significant fluctuations from period to period. See Item 3. Quantitative and Qualitative Disclosures About Market Risk for information on how hypothetical changes in commodity prices would impact the fair value of our derivatives as of March 31, 2024.

Subsequent to March 31, 2024 and through May 1, 2024 we entered into additional derivative contracts as set forth in the tables below.
 

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Natural gas derivatives
Period and Type of Contract		Average Volumes Hedged						Weighted Average Hedge Price ($/MMBtu)
January 2027 - December 2027
Swaps - Henry Hub			260,000			MMBtus/day		$	3.99

 

Crude oil derivatives
Period and Type of Contract		Average Volumes Hedged						Weighted Average Hedge Price ($/Bbl)
May 2024 - February 2025
Swaps - WTI			24,000			Bbls/day		$	80.25

 

Critical Accounting Policies and Estimates

There have been no changes in our critical accounting policies and estimates from those disclosed in our 2023 Form 10-K.

 

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ITEM 3. Quantitative and Qualitative Disclosures About Market Risk

General. We are exposed to a variety of market risks including commodity price risk, credit risk, and interest rate risk. We seek to address these risks through a program of risk management which may include the use of derivative instruments.

Commodity Price Risk. Our primary market risk exposure is in the prices we receive from sales of crude oil, natural gas, and natural gas liquids. Realized pricing is primarily driven by the prevailing worldwide price for crude oil and spot market prices applicable to our natural gas and natural gas liquids production. Commodity prices have been volatile and unpredictable for several years, and we expect this volatility to continue in the future. The prices we receive for production depend on many factors outside of our control, including differences between product prices at sales points and the applicable index prices. Based on our average daily production for three months ended March 31, 2024, and excluding the effect of derivative instruments in place, our annual revenue would increase or decrease by approximately $871 million for each $10.00 per barrel change in crude oil prices at March 31, 2024 and $441 million for each $1.00 per Mcf change in natural gas prices at March 31, 2024.

To reduce price risk caused by market fluctuations in commodity prices, from time to time we economically hedge a portion of our anticipated production as part of our risk management program. In addition, we may utilize basis contracts to hedge the differential between derivative contract index prices and those of our physical pricing points. Reducing our exposure to price volatility helps secure funds to be used for our capital program and general corporate purposes. Our decision on the quantity and price at which we choose to hedge our production is based in part on our view of current and future market conditions. We may choose not to hedge future production if the price environment for certain time periods is deemed to be unfavorable. Additionally, we may choose to settle existing derivative positions prior to the expiration of their contractual maturities. While hedging, if utilized, limits the downside risk of adverse price movements, it also limits future revenues from upward price movements.

The fair value of our derivative instruments at March 31, 2024 was a net asset of $299.5 million, which is comprised of a $357.7 million net asset associated with our natural gas derivatives partially offset by a $58.2 million net liability associated with our crude oil derivatives. The following table shows how a hypothetical +/- 10% change in the underlying forward prices used to calculate the fair value of our derivatives would impact the fair value estimates as of March 31, 2024.

 

				Hypothetical Fair Value
In thousands		Change in Forward Price		Asset (Liability)
Crude Oil		-10%		$	69,916
Crude Oil		+10%		$	(186,259	)
Natural Gas		-10%		$	582,536
Natural Gas		+10%		$	132,882

 

Changes in the fair value of our derivatives from the above price sensitivities would produce a corresponding change in our total revenues.

Credit Risk. We monitor our risk of loss due to non-performance by counterparties of their contractual obligations. Our principal exposure to credit risk is through the sale of our production, which we market to energy marketing companies, crude oil refining companies, and natural gas gathering and processing companies ($1.2 billion in receivables at March 31, 2024), and our joint interest and other receivables ($302 million at March 31, 2024).

 

We monitor our exposure to counterparties on our commodity sales primarily by reviewing credit ratings, financial statements and payment history. We extend credit terms based on our evaluation of each counterparty’s credit worthiness. We have not generally required our counterparties to provide collateral to secure commodity sales receivables owed to us. Historically, our credit losses on commodity sales receivables have been immaterial.

Joint interest receivables arise from billing the individuals and entities who own a partial interest in the wells we operate. These individuals and entities participate in our wells primarily based on their ownership in leases included in units on which we wish to drill. We can do very little to choose who participates in our wells. In order to minimize our exposure to this credit risk we generally request prepayment of drilling costs where it is allowed by contract or state law. For such prepayments, a liability is recorded and subsequently reduced as the associated work is performed. This liability was $37 million at March 31, 2024, which will be used to

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offset future capital costs when billed. In this manner, we reduce 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 interest. Historically, our credit losses on joint interest receivables have been immaterial.

Interest Rate Risk. Our exposure to changes in interest rates relates primarily to variable-rate borrowings we have outstanding from time to time under our credit facility. Credit facility borrowings bear interest at market-based interest rates plus a margin based on the terms of the borrowing and the credit ratings assigned to our senior, unsecured, long-term indebtedness. All of our other long-term indebtedness is fixed rate and does not expose us to the risk of cash flow loss due to changes in market interest rates.

We had $490 million of variable rate borrowings outstanding on our credit facility at April 30, 2024. The impact of a 0.25% increase in interest rates on this amount of debt would result in increased interest expense and reduced income before income taxes of approximately $1.2 million per year.

We manage our interest rate exposure by monitoring both the effects of market changes in interest rates and the proportion of our debt portfolio that is variable-rate versus fixed-rate debt. We may utilize interest rate derivatives to alter interest rate exposure in an attempt to reduce interest rate expense related to existing debt issues. Interest rate derivatives may be used solely to modify interest rate exposure and not to modify the overall leverage of the debt portfolio. We currently have no interest rate derivatives.

ITEM 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of the end of the period covered by this report, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) was performed under the supervision and with the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer concluded the Company’s disclosure controls and procedures were effective as of March 31, 2024 to ensure information required to be disclosed in the reports it files and submits under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and information required to be disclosed under the Exchange Act is accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

During the three months ended March 31, 2024, there were no changes in our internal control over financial reporting (as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Inherent Limitations on Controls and Procedures

A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Accordingly, even an effective system of internal control will provide only reasonable assurance that the objectives of the internal control system are met.

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PART II. Other Information

ITEM 1. Legal Proceedings

We are involved in various legal proceedings including, but not limited to, commercial disputes, claims from royalty and surface owners, property damage claims, claims made by former shareholders in connection with our take-private transaction, antitrust claims related to the market price of hydrocarbons, personal injury claims, regulatory compliance matters, disputes with tax authorities and other matters. While the outcome of these legal matters cannot be predicted with certainty, we do not expect them to have a material adverse effect on our financial condition, results of operations or cash flows.

ITEM 1A. Risk Factors

In addition to the information set forth in this Form 10-Q, you should carefully consider the risk factors discussed in Part I, Item 1A. Risk Factors in our 2023 Form 10-K, which could materially affect our business, financial condition or future results. The risks described in this Form 10-Q, if any, and in our 2023 Form 10-K are not the only risks facing our Company. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results.

There have been no material changes in our risk factors from those disclosed in our 2023 Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds

Not applicable.

 

ITEM 3. Defaults Upon Senior Securities

Not applicable.

 

ITEM 4. Mine Safety Disclosures

Not applicable.

 

ITEM 5. Other Information

Not applicable.

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ITEM 6. Exhibits

The exhibits required to be filed pursuant to Item 601 of Regulation S-K are set forth below.

3.1		Conformed version of Fifth Amended and Restated Certificate of Incorporation of Continental Resources, Inc. filed as Exhibit 3.1 to the Company's Form 10-K for the year ended December 31, 2022 (Commission File No. 001-32886) filed February 22, 2023 and incorporated herein by reference.
3.2		Fifth Amended and Restated Bylaws of Continental Resources, Inc. filed as Exhibit 3.2 to the Company’s Form 10-K for the year ended December 31, 2022 (Commission File No. 001-32886) filed February 22, 2023 and incorporated herein by reference.
31.1*		Certification of the Company’s Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. Section 7241).
31.2*		Certification of the Company’s Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (15 U.S.C. Section 7241).
101.INS*		Inline XBRL Instance Document - the Inline XBRL Instance Document does not appear in the Interactive Data file because its XBRL tags are embedded within the Inline XBRL document
101.SCH*		Inline XBRL Taxonomy Extension Schema Document with Embedded Linkbases Document
104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101)

* Filed herewith

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		CONTINENTAL RESOURCES, INC.
Date:	May 3, 2024	By:		/s/ John D. Hart
				John D. Hart
				Chief Financial Officer and Executive Vice President of Strategic Planning (Duly Authorized Officer and Principal Financial Officer)

 

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