Continental Resources in Oklahoma City announced this week plans for a $1 billion stock buyback. The announcement was made as the company also said its directors approved a quarterly dividend of 5 cents per share on the company’s common stock.
“Today marks another milestone in Continental’s history as we initiate a total shareholder return strategy,” said Harold Hamm, Chairman and Chief Executive Officer. “Our disciplined approach to balancing capital-efficient growth and reducing debt has enabled us to approve both an initial $0.20 per share annualized dividend and an initial $1 billion share-repurchase program. This demonstrates the confidence we have in the quality and sustainability of our assets and our commitment to maximizing shareholder value. We see the current value of our equity as being unreasonably low, making the acquisition of our stock the best use of excess cash at this time.”
He later told The Oklahoman, “I’m OK with it for sure. All our employees own stock so this is good for all our employees at Continental.”
The Company’s total shareholder return strategy now includes:
- Dividend: The Company’s Board of Directors approved the initiation of a quarterly dividend of $0.05 per share on the Company’s outstanding common stock, payable on November 21, 2019 to stockholders of record on November 7, 2019. This is equivalent to $0.20 per share, or approximately $75 million, on an annualized basis. All dividends beyond the November dividend are subject to Board approval. The Company expects to generate sufficient cash flow to increase the dividend over subsequent years should the Board elect to do so.
- Share Repurchases: The Company’s Board of Directors also authorized an initial share-repurchase program of up to $1 billion, beginning in second quarter 2019 and continuing through 2020, at times and levels deemed appropriate by Company management. The Company expects a substantial portion of this initial amount will be executed by year-end 2019. Should market conditions warrant, the Company could prioritize further share repurchases in lieu of production growth.
- Debt Pay Down: Over the past 3 years, Continental has reduced net debt (non-GAAP) by approximately $1.7 billion. The Company plans to continue reducing net debt and expects to approach approximately $5 billion of net debt by year-end 2019. The Company plans to further reduce net debt to $4.2 billion or below longer term.
- Five Year Vision: Over the next five years, the Company now expects to generate approximately $5 billion of free cash flow (non-GAAP) at $60 WTI, which is approximately $1 billion more than our previously disclosed projection. This increase is being driven primarily by improvement in capital efficiencies and crude oil differentials. This cash flow is expected to generate ample liquidity for further debt reduction, dividends, additional share repurchases or general corporate purposes. Additionally, annual return on capital employed (ROCE) is expected to improve throughout the five year period, averaging approximately 14.5%, assuming $60 WTI.