Continental Resources Reports Fourth Quarter And Full-Year 2017 Results
$841.9 Million (MM) for 4Q 2017 Net Income, or $2.25 per Diluted Share; Including $128.2 MM from Operations and $713.7 MM Benefit from Federal Tax Reform
286,985 Barrels of Oil Equivalent (Boe) per Day (59% Oil) Average for 4Q 2017 Production, up 37% over 4Q 2016; Oil Production up 44% over 4Q 2016
242,637 Boe per Day (57% Oil) Average Full-Year 2017 Production, up 12% over 2016
$261 MM Debt Reduction in 4Q 2017; $95 MM Debt Reduction in January 2018
1.33 Billion Boe Year-End 2017 Proved Reserves, Up 4% over Year-End 2016
Bakken Continues to Set Company Records:
-- 39 gross operated wells brought online in 4Q 2017 with 24-hour initial production (IP) average of 2,180 Boe per well
-- Five 4Q 2017 wells are Company record Bakken producers, flowing an average of 2,230 Boe per day (80% oil) during first 30 days
-- 4Q 2017 Bakken production up 58% over 4Q 2016, reaching all time high
OKLAHOMA CITY, Feb. 21, 2018 /PRNewswire/ -- Continental Resources, Inc. (NYSE: CLR) (the Company) today announced fourth quarter and full-year 2017 operating and financial results. Continental reported net income of $841.9 million, or $2.25 per diluted share, for the quarter ended December 31, 2017. Of total net income, $128.2 million was from operations and $713.7 million was from federal tax reform. The Company reported full-year net income of $789.4 million, or $2.11 per diluted share, with $75.7 million from operations and $713.7 million from federal tax reform.
The Company's net income includes certain items typically excluded by the investment community in published estimates, the result of which is referred to as "adjusted net income." In fourth quarter 2017, these typically excluded items in aggregate represented $688.2 million, or $1.84 per diluted share, of Continental's reported net income. Adjusted net income for the fourth quarter was $153.7 million, or $0.41 per diluted share. For full-year 2017, these typically excluded items in aggregate represented $598.6 million, or $1.60 per diluted share. Adjusted net income for full-year 2017 was $190.8 million, or $0.51 per diluted share.
Net cash provided by operating activities for fourth quarter 2017 was $731.1 million, and for full-year 2017 it was $2.1 billion. EBITDAX for fourth quarter 2017 was $837.9 million, contributing to full-year 2017 EBITDAX of $2.4 billion. Definitions and reconciliations of adjusted net income (loss), adjusted net income (loss) 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.
"Continental's fourth quarter performance was a fitting completion to a standout year," said Harold Hamm, Chairman and Chief Executive Officer. "As we made clear in our 2018 guidance announcement, we expect even stronger performance in 2018 with both significant production growth and robust free cash flow."
Full-Year 2017 Production Increases 12% Over 2016
Fourth quarter 2017 net production totaled 26.4 million Boe, or 286,985 Boe per day, up 18% from third quarter 2017, with oil production up 20% to 168,066 barrels of oil (Bo) per day. Compared to fourth quarter 2016, Continental increased production 37%, with oil production up 44%.
Total net production for fourth quarter 2017 included 168,066 Bo per day (59% of production) and 713.5 million cubic feet (MMcf) of natural gas per day (41% of production). Full-year 2017 production averaged 242,637 Boe per day.
First quarter 2018 production is estimated to be between 285,000 and 290,000 Boe per day.
The following table provides the Company's average daily production by region for the periods presented.
Bakken Continues to Deliver Record Results
Continental's Bakken net production reached an all-time high in the fourth quarter averaging 165,598 Boe per day, up 58% over the fourth quarter 2016. The Company completed 97 gross (37 net) operated and non-operated Bakken wells with first production during fourth quarter 2017. Thirty-nine of the fourth quarter wells were operated by the Company with an average 24-hour IP of 2,180 Boe per day. The Company completed a total 350 gross (134 net) operated and non-operated Bakken wells with first production for full-year 2017. The Company plans to keep an average of six operated drilling rigs in the play during 2018.
Five of the fourth quarter operated wells produced the highest 30-day rates ever recorded from the Company's operated Bakken wells, averaging 2,230 Boe per day. This included the Monroe 6-2H that produced at an average 30-day rate of 2,869 Boe, which was the best 30-day rate ever achieved by the Company from a Bakken well. All of the wells were completed using the Company's optimized completion designs with various combinations of larger proppant loads, tighter stage spacing and diverter technology, along with accelerated flow backs and high-capacity lift.
From late 2016 through fourth quarter 2017, the Company has brought on 134 optimized Bakken wells in Dunn, McKenzie, Mountrail and Williams counties. Average production per well is slightly outperforming the Company's updated 1,100 MBoe Bakken type curve announced in August 2017. The type curve delivers a 125% rate of return at $60 per barrel WTI (WTI) and $3.00 per Mcf Henry Hub (HH). This more than doubles the rate of return expected from the Company's previous type curve.
"Continental's returns from the Bakken compete head to head with the best oil plays in the U.S. today, driven by our optimized completions, lower production expense and the $4.50 per Bo improvement in oil differentials since 2015," said Jack Stark, President. "On top of that, Bakken production is 80% crude oil."
The Company exited 2017 with a drilled-well inventory of 165 gross operated wells in the Bakken, including 52 gross operated wells with stimulation complete or in progress, but which did not have first sales in 2017.
STACK: Density Tests Defining Unit Development
Continental's STACK net production averaged 47,914 Boe per day in fourth quarter 2017, a 96% increase over fourth quarter 2016. A total of 63 gross (23 net) operated and non-operated STACK wells with first production were completed during the quarter, and 158 gross (52 net) operated and non-operated wells were completed with first production for the full year. The Company plans to keep an average of eight operated drilling rigs in the play during 2018, with four to six targeting the Woodford and Meramec formations as part of the joint development agreement with SK E&S.
The Company is introducing its preliminary economic model for unit development in the STACK Meramec over-pressured oil window. The unit economic model is based on the results of six full-unit density tests the Company has completed with three-to-five wells per zone. Initial results indicate that four wells per zone on average will deliver the maximum PV-10 from a single Meramec reservoir in a unit. The Company's unit economic model includes a total of eight wells with four wells in two Meramec reservoirs given the Company expects to target two Meramec reservoirs on average underlying its acreage in the over-pressured oil window. Combined these eight wells are projected to recover an estimated 9.6 million Boe (MMBoe) and deliver a PV-10 of approximately $87 million with a rate of return of 96%, assuming a completed well cost of $9.5 million for a 9,800-foot lateral well at $60 WTI and $3 HH. In addition, up to four more wells can be expected to be completed in the underlying Woodford formation.
The unit economic model includes results from the Verona and Gillilan density tests that were completed during the fourth quarter. These two units adjoin each other and were strategically selected to compare eight and 10 well density development. The Verona unit included four wells in the Upper and four wells in the Lower Meramec. The eight wells had a combined unit 24-hour IP of 18,205 Boe per day, averaging 2,281 Boe per day per well, and 68% of the production was crude oil. Results for the Verona were in-line with Company expectations. The Gillilan unit included five wells in the Upper and five wells in the Lower Meramec. The 10 wells had a combined unit 24-hour IP of 11,024 Boe per day, averaging 1,102 Boe per day per well, and 64% of the production was crude oil. Early performance from the Gillilan wells indicates the unit was over-drilled with ten wells and further supports the Company's eight-well model.
During the fourth quarter the Company also completed its first density test in the STACK Meramec over-pressured condensate window. The Angus Trust density test involved only half of the unit with three wells drilled in the Upper Meramec and three wells drilled in the Lower Meramec. This is the tightest well spacing Continental has tested to date, which is the equivalent of six wells per zone or 12 wells in the unit. The half-unit 24-hour IP for the Angus Trust test was 15,955 Boe per day and 39% of the production was crude oil. Average IP per well was 2,659 Boe per day. Early performance indicates the maximum PV-10 from a unit can be achieved with fewer than 12 Meramec wells per unit in the over-pressured condensate window. To further evaluate the proper well density, the Company has begun drilling a second density test at the Simba unit located one mile west of the Angus Trust unit. The Simba will be a six-well, full-unit test with three wells in Upper and three wells in the Lower Meramec.
In fourth quarter 2017, SCOOP net production averaged 62,242 Boe per day (23% oil), or 22% of the Company's total production in fourth quarter. A total of 12 gross (1 net) operated and non-operated SCOOP wells were completed with first production during the quarter, and 71 gross (16 net) operated and non-operated wells were completed with first production for the full year. In 2018, the Company plans to average seven operated rigs in the play.
SCOOP Springer: Beginning Full-Field Development; Type Curve EUR Uplifted 28% for Unit Well
Continental has concluded its initial Springer density testing program and is beginning full-field development with five rigs dedicated to the Springer in 2018. The Company has completed three density pilots that tested four, five and six well configurations in the Springer reservoir. Results indicate that on average, four wells should deliver the maximum PV-10 from the Springer reservoir on a unit basis. A Springer unit well is projected to recover 1,200 MBoe at a completed well cost of $9.5 million for a 7,500-foot lateral. This is a 28% uplift in EUR from the Company's legacy 940 MBoe type curve for a 4,500-foot standalone well. The Company's unit economic model projects that a four-well Springer unit will produce a combined 4.8 MMBoe over the life of the wells and generate a PV-10 of approximately $68 million and a rate of return of 175% assuming $60 WTI and $3 HH. This adds approximately $44 million to the PV-10 of a Springer unit compared to a standalone well at $60 WTI and $3 HH.
"Longer laterals and optimized completions in the Springer have doubled our type curve rate of return with $4.0 million incremental first-year gross cash flow per well," said Gary Gould, SVP of Production and Resource Development. "Approximately 20% of Continental's operated drilling and completion capital budget will be focused on the Springer oil play in 2018."
During the fourth quarter, the Company completed its third density pilot with the completion of the six-well Celesta density unit. The six wells flowed at a combined peak 24-hour rate of 6,014 Boe (81% oil). The five new wells produced at an average 24-hour peak production rate of 939 Boe per day. The average lateral length was 9,400 feet for the six wells. Early performance of the Celesta unit wells indicates the maximum PV-10 from a unit can be achieved with fewer than six wells and supports the Company's four-well economic model for a Springer unit.
"We are eager to begin development of this prolific oil reservoir," said Mr. Stark. "Timing is right to take advantage of improved crude prices and our optimized completion technology."
SCOOP Woodford Oil Type Curve Increased Again
The Company announced it has increased the EUR for two-mile lateral wells drilled in the SCOOP Woodford oil window by approximately 13% to 1,520 MBoe per well, with 60% of production being crude oil. The increase in EUR was based on the results of 32 optimized completions conducted over the past several years in the SCOOP Woodford oil window and assumes an average 9,800-foot lateral well. At a targeted completed well cost of $12.7 million per well, this yields a 55% rate of return at $60 WTI and $3.00 HH.
The Company recently completed the Pyle 1-36-25XH in the SCOOP Woodford oil window. The Pyle flowed at a 24-hour IP of 1,812 Boe with 81% of the production being crude oil from a 9,800-foot lateral.
2017 Proved Reserves: Standardized Measure and PV-10 (non-GAAP) Up 90% and 78%, respectively, over Year-End 2016
The Company announced proved reserves of 1.33 billion Boe at December 31, 2017, a 4% increase compared with year-end 2016 proved reserves. The 2017 average SEC oil price was $51.34 per barrel, and the 2017 average SEC natural gas price was $2.98 per MMBtu.
At December 31, 2017, Continental had a Standardized Measure of discounted future net cash flows of $10.47 billion. Continental's 2017 proved reserves had a PV-10 of $11.83 billion, up 78% year-over-year. PV-10 is a non-GAAP financial measure and generally differs from Standardized Measure, the most directly comparable GAAP financial metric, because it does not include the effects of discounted income taxes on future net revenues of approximately $1.36 billion. Continental and others in the crude oil and natural gas industry use PV-10 to compare the relative size and value of proved reserves without regard to specific income tax characteristics.
Year-end 2017 proved reserves were 48% crude oil, 89% operated by the Company, and approximately 45% were classified as proved developed producing (PDP).
The Bakken accounted for 635.5 MMBoe, or 48% of Continental's year-end 2017 proved reserves. The SCOOP Woodford and SCOOP Springer plays accounted for 491.8 MMBoe, or 37% of Continental's year-end 2017 proved reserves. The STACK accounted for 167.4 MMBoe, or 13% of Continental's year-end 2017 proved reserves.
The Company had a total of 1,783 gross (976 net) proved undeveloped (PUD) locations at year-end 2017, with the Bakken accounting for 1,252 gross (656 net) PUD locations. SCOOP accounted for an additional 336 gross (230 net) PUD locations, while STACK accounted for 195 gross (90 net) PUD locations at year-end 2017.
Financial Update: 4Q 2017 Annualized Net-Debt-to-EBITDAX Ratio below 1.9x
"We were very pleased to finish 2017 in line or better than our guidance," said John Hart, Chief Financial Officer. "Fourth quarter 2017 was excellent from an operations standpoint. Production expense per Boe was down 17% from third quarter 2017, and all other cash operating costs were within budget. This speaks directly to the performance of our operating teams and the premier quality of our assets.
"By year end, long-term debt was $6.35 billion, and our fourth quarter annualized net-debt-to-EBITDAX ratio was 1.88x. We fully expect this to continue to trend down through 2018 as we pay down debt with excess cash flow, sell non-core assets, grow production and reap the benefit of higher commodity prices."
Net debt and EBITDAX are non-GAAP measures. Definitions and reconciliations of these measures to the most directly comparable U.S. GAAP financial measure are provided subsequently under the header "Non-GAAP Financial Measures."
In fourth quarter 2017, Continental's average realized sales price excluding the effects of derivative positions was $51.16 per barrel of oil and $3.30 per Mcf of gas, or $38.27 per Boe. Based on realizations without the effect of derivatives, the Company's fourth quarter 2017 oil differential was $4.23 per barrel below the NYMEX daily average for the period. The realized wellhead natural gas price for the quarter was on average $0.37 per Mcf above the average NYMEX Henry Hub benchmark price.
The corporate oil differential has improved by $2.86 per Bo from first quarter 2017, and the corporate gas differential has improved by $0.66 per Mcf. These trends reflect improved takeaway capacity in both the Bakken and Oklahoma as well as improving natural gas liquids pricing. The Company is expecting crude oil differentials to continue to improve in 2018 due to a recent renegotiation of an existing transportation contract at more favorable rates and terms, which should impact the Company's cash flow growth considerably.
Production expense per Boe was $3.17 for fourth quarter 2017, down a remarkable 17% compared with $3.82 per Boe for third quarter 2017. This improvement was primarily driven by reduced water handling and disposal costs from increased recycling activities in Oklahoma, reduced workover activity and the increase in production quarter over quarter. Other select operating costs and expenses for fourth quarter 2017 included production taxes of 7.3% of oil and natural gas sales; DD&A of $17.93 per Boe; and total G&A of $2.30 per Boe.
As of December 31, 2017, Continental's balance sheet included $43.9 million in cash and cash equivalents and $188 million of borrowings against the Company's revolving credit facility. At year-end 2017 Continental's long-term debt was $6.35 billion, down $261 million from September 30, 2017. As of January 31, 2018 Continental's long-term debt was down another $95 million to $6.26 billion.
Continental's 2018 guidance remains as announced on February 15, 2018 and can be found at the conclusion of this press release.
The following table provides the Company's production results, average sales prices, per-unit operating costs, results of operations and certain non-GAAP financial measures for the periods presented. Average sales prices exclude any effect of derivative transactions. Per-unit expenses have been calculated using sales volumes.
Fourth Quarter and Full-Year Earnings Conference Call
Continental plans to host a conference call to discuss fourth quarter and full-year results on Thursday, February 22, 2018, at 12 p.m. ET (11 a.m. CT). Those wishing to listen to the conference call may do so via the Company's website at http://www.clr.com/ or by phone:
A replay of the call will be available for 14 days on the Company's website or by dialing:
Continental plans to publish a fourth quarter and full-year 2017 summary presentation to its website at http://www.clr.com/ prior to the start of its earnings conference call on February 22, 2018.
Members of Continental's management team plan to participate in the following investment conferences:
About Continental Resources
Continental Resources (NYSE: CLR) is a top 10 independent oil producer in the U.S. Lower 48 and a leader in America's energy renaissance. Based in Oklahoma City, Continental is the largest leaseholder and the largest producer in the nation's premier oil field, the Bakken play of North Dakota and Montana. The Company also has significant positions in Oklahoma, including its SCOOP Woodford and SCOOP Springer discoveries and the STACK plays. With a focus on the exploration and production of oil, Continental has unlocked the technology and resources vital to American energy independence and our nation's leadership in the new world oil market. In 2018, the Company will celebrate 51 years of operations. For more information, please visit http://www.clr.com/.
Cautionary Statement for the Purpose of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995
This press release includes "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 included in this press release 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 are forward-looking statements. When used in this press release, the words "could," "may," "believe," "anticipate," "intend," "estimate," "expect," "project," "budget," "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 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. The risks and uncertainties include, but are not limited to, commodity price volatility; the geographic concentration of our operations; financial market and economic volatility; the inability to access needed capital; the risks and potential liabilities inherent in crude oil and natural gas drilling and production and the availability of insurance to cover any losses resulting therefrom; difficulties in estimating proved reserves and other reserves-based measures; declines in the values of our crude oil and natural gas properties resulting in impairment charges; our ability to replace proved reserves and sustain production; the availability or cost of equipment and oilfield services; leasehold terms expiring on undeveloped acreage before production can be established; our ability to project future production, achieve targeted results in drilling and well operations and predict the amount and timing of development expenditures; the availability and cost of transportation, processing and refining facilities; legislative and regulatory changes adversely affecting our industry and our business, including initiatives related to hydraulic fracturing; increased market and industry competition, including from alternative fuels and other energy sources; and the other risks described under Part I, Item 1A. Risk Factors and elsewhere in the Company's Annual Report on Form 10-K for the year ended December 31, 2016, and once filed, for the year ended December 31, 2017, registration statements and other reports filed from time to time with the SEC, and other announcements the Company makes from time to time.
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 press release 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 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.
Readers are cautioned that initial production rates are subject to decline over time and should not be regarded as reflective of sustained production levels. In particular, production from horizontal drilling in shale oil and natural gas resource plays and tight natural gas plays that are stimulated with extensive pressure fracturing are typically characterized by significant early declines in production rates.
We use the term "EUR" or "estimated ultimate recovery" to describe potentially recoverable oil and natural gas hydrocarbon quantities. We include these estimates to demonstrate what we believe to be the potential for future drilling and production on our properties. These estimates are by their nature much more speculative than estimates of proved reserves and require substantial capital spending to implement recovery. Actual locations drilled and quantities that may be ultimately recovered from our properties will differ substantially. EUR data included herein remain subject to change as more well data is analyzed.
Non-GAAP Financial Measures
The Company's PV-10 value, a non-GAAP financial measure, is derived from the Standardized Measure of discounted future net cash flows, which is the most directly comparable financial measure computed using U.S. GAAP. PV-10 generally differs from Standardized Measure because it does not include the effects of income taxes on future net revenues. At December 31, 2017, the Company's PV-10 totaled approximately $11.83 billion. The Standardized Measure of discounted future net cash flows was approximately $10.47 billion at December 31, 2017, representing a $1.36 billion difference from PV-10 due to the effect of deducting estimated future income taxes in arriving at the Standardized Measure. The Company believes the presentation of PV-10 is relevant and useful to investors because it presents the discounted future net cash flows attributable to proved reserves held by companies without regard to the specific income tax characteristics of such entities and is a useful measure of evaluating the relative monetary significance of crude oil and natural gas properties. Investors may utilize PV-10 as a basis for comparing the relative size and value of the Company's proved reserves to other companies. PV-10 should not be considered as a substitute for, or more meaningful than, the Standardized Measure as determined in accordance with U.S. GAAP. Neither PV-10 nor Standardized Measure represents an estimate of the fair market value of the Company's crude oil and natural gas properties.
Net debt is a non-GAAP measure. We define net debt as total debt less cash and cash equivalents as determined under U.S. GAAP. Management uses net debt to determine the Company's outstanding debt obligations that would not be readily satisfied by its cash and cash equivalents on hand. We believe this metric is useful to analysts and investors in determining the Company's leverage position since the Company has the ability to, and may decide to, use a portion of its cash and cash equivalents to reduce debt. At December 31, 2017, the Company's net debt amounted to $6.31 billion, representing total debt of $6.35 billion less cash and cash equivalents of $0.04 billion.
We use a variety of financial and operational measures to assess our performance. Among these measures is EBITDAX. We define EBITDAX as earnings before interest expense, income taxes, depreciation, depletion, amortization and accretion, property impairments, exploration expenses, non-cash gains and losses resulting from the requirements of accounting for derivatives, non-cash equity compensation expense, and losses on extinguishment of debt. EBITDAX is not a measure of net income or operating cash flows as determined by U.S. GAAP.
Management believes EBITDAX is useful because it allows us to more effectively evaluate our operating performance and compare the results of our operations from period to period without regard to our financing methods or capital structure. Further, we believe EBITDAX is a widely followed measure of operating performance and may also be used by investors to measure our ability to meet future debt service requirements, if any. We exclude the items listed above from net income (loss) and operating cash flows in arriving at EBITDAX because these amounts can vary substantially from company to company within our industry depending upon accounting methods and book values of assets, capital structures and the method by which the assets were acquired.
EBITDAX should not be considered as an alternative to, or more meaningful than, net income (loss) or operating cash flows as determined in accordance with U.S. GAAP or as an indicator of a company's operating performance or liquidity. Certain items excluded from EBITDAX are significant components in understanding and assessing a company's financial performance, such as a company's cost of capital and tax structure, as well as the historic costs of depreciable assets, none of which are components of EBITDAX. Our computations of EBITDAX may not be comparable to other similarly titled measures of other companies.
The following table provides a reconciliation of our net income (loss) to EBITDAX for the periods presented.
The following table provides a reconciliation of our net cash provided by operating activities to EBITDAX for the periods presented.
Adjusted earnings and adjusted earnings per share
Our presentation of adjusted earnings and adjusted earnings per share that exclude the effect of certain items are non-GAAP financial measures. Adjusted earnings and adjusted earnings per share represent earnings and diluted earnings per share determined under U.S. GAAP without regard to non-cash gains and losses on derivative instruments, property impairments, losses on certain litigation settlements, gains and losses on asset sales, losses on extinguishment of debt and the impact of U.S. tax reform legislation. Management believes these measures provide useful information to analysts and investors for analysis of our operating results. In addition, management believes these measures are used by analysts and others in valuation, comparison and investment recommendations of companies in the oil and gas industry to allow for analysis without regard to an entity's specific derivative portfolio, impairment methodologies, and property dispositions. Adjusted earnings and adjusted earnings per share should not be considered in isolation or as a substitute for earnings or diluted earnings per share as determined in accordance with U.S. GAAP and may not be comparable to other similarly titled measures of other companies. The following tables reconcile earnings and diluted earnings per share as determined under U.S. GAAP to adjusted earnings and adjusted diluted earnings per share for the periods presented.
Cash general and administrative expenses per Boe
Our presentation of cash general and administrative ("G&A") expenses per Boe is a non-GAAP measure. We define cash G&A per Boe as total G&A determined in accordance with U.S. GAAP less non-cash equity compensation expenses, expressed on a per-Boe basis. We report and provide guidance on cash G&A per Boe because we believe this measure is commonly used by management, analysts and investors as an indicator of cost management and operating efficiency on a comparable basis from period to period. In addition, management believes cash G&A per Boe is used by analysts and others in valuation, comparison and investment recommendations of companies in the oil and gas industry to allow for analysis of G&A spend without regard to stock-based compensation programs which can vary substantially from company to company. Cash G&A per Boe should not be considered as an alternative to, or more meaningful than, total G&A per Boe as determined in accordance with U.S. GAAP and may not be comparable to other similarly titled measures of other companies.
Free cash flow
Our presentation of free cash flow is a non-GAAP measure. We define free cash flow as cash flows from operations before changes in working capital items less capital expenditures excluding acquisitions and divestitures. Free cash flow is not a measure of net income (loss) or cash flows as determined by U.S. GAAP. Management believes that these measures are useful to management and investors as a measure of a company's ability to internally fund its capital expenditures and to service or incur additional debt. These measures eliminate the impact of certain items that management does not consider to be indicative of the Company's performance from period to period. From time to time the Company provides forward-looking free cash flow estimates; however, the Company is unable to provide a quantitative reconciliation of the forward-looking non-GAAP measure to its most directly comparable forward-looking GAAP measure because management cannot reliably quantify certain of the necessary components of such forward-looking GAAP measure. The reconciling items in future periods could be significant.
SOURCE Continental Resources