Continental Resources President and CEO Bill Berry called the company’s first quarter earnings “outstanding” and he wasn’t wrong.
Here’s what made it “outstanding.” It had $1.5 billion cash flow from operations in addition to $1.15 billion in free cash flow. The company reported $597.8 million in net income or $1.65 per diluted share along with $960 million in adjusted net income and $2.65 per adjusted share.
Continental’s quarterly dividend was increased to 28 cents a share. This dividend represents a $0.05, or approximately 22%, increase to the company’s $0.23 per share quarterly dividend paid in first quarter 2022 and equates to an approximate 2.0% annualized dividend yield, as of May 2, 2022, which exceeds the S&P 500 average yield.
Net cash provided by operating activities for first quarter 2022 was $1.50 billion, and EBITDAX was $1.84 billion (non-GAAP).
“Continental’s outstanding first quarter 2022 results underscore our commitment to both return of capital to shareholders and corporate disciplined return on capital employed,” said Berry in responding to the figures released this week.
“Our fifth consecutive increase to our quarterly dividend and approximately 31% projected return on capital employed continues to competitively differentiate us versus both our peers and the S&P 500 by delivering on our unique shareholder value proposition.”
Total production in the first quarter 2022 averaged 373.8 MBoepd while oil production averaged 194.8 MBopd. Continental also averaged 1,074 MMcfpd of natural gas production.
“The company delivered a record quarter of adjusted earnings per share and exceptional free cash flow generation while executing the $450 million Powder River Basin acquisition and $63 million Summit carbon capture investment during the first quarter 2022,” said John Hart, Chief Financial Officer & Executive Vice President of Strategic Planning.
During first quarter 2022, Continental repurchased 1.84 million shares at an aggregate cost of $100 million. Cumulatively it has repurchased 18.81 million shares at an aggregate cost of $541 million (average of $28.76 per share), leaving approximately $960 million of authorized repurchasing capacity remaining under the $1.5 billion program.
During first quarter 2022, Continental also reduced its total debt to $6.57 billion, with $264 million of total debt reduction since December 31, 2021. This is inclusive of the $450 million Powder River Basin acquisition and $63 million Summit carbon capture investment.
The company is accelerating its net debt reduction and is targeting $4.8 billion of total debt, which assumes a paydown of the Company’s 2023 and 2024 senior notes, and $4.0 billion of net debt by year end 2022.
Continental also recently announced its modified 2022 capital program of $2.6 to $2.7 billion from $2.3 billion, which is expected to enhance the energy company’s projected return on capital employed by 2.0% over its originally projected 21% return on capital employed at $80 WTI and $3.50 Henry Hub. Adjusting for current commodity prices, the company’s projected return on capital employed is increasing to approximately 31% in 2022.
The company has updated its 2022 annual oil production guidance to 200 to 210 MBopd from 195 to 205 MBopd. This is inclusive of production from the closing of the Company’s Powder River Basin acquisition on March 25, 2022, through December 31, 2022. The Company is also projecting a December 2022 oil production exit rate of approximately 220 to 230 MBopd. Additionally, the Company has updated its 2022 annual natural gas production guidance to 1,100 MMcfpd to 1,200 MMcfpd from 1,040 to 1,140 MMcfpd.
The updated 2022 capital program is projected to generate approximately $6.5 to $7.0 billion of cash flow from operations and $4.3 to $4.7 billion of free cash flow for full-year 2022, inclusive of first quarter 2022 actuals and strip WTI and Henry Hub prices as of May 2, 2022, for the remainder of the year. The Company’s full-year 2022 free cash flow projection equates to a 21% to 23% free cash flow yield (non-GAAP).
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