United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission File Number: 333-61547
CONTINENTAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 73-0767549
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
302 N. Independence, Suite 300, Enid, Oklahoma 73701
(Address of principal executive offices) (Zip Code)
(580) 233-8955
(Registrant's telephone number, including area code)
NONE
(Former name, former address and former fiscal year, if
change since last report)
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]
The Registrant is not subject to the filing requirements of Section 13 and 15(d)
of the Securities Exchange Act of 1934 (the "Act"), but files reports required
by Section 13 and 15(d) of the Act pursuant to contractual obligations.
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Class Outstanding as of August 13, 2002
Common Stock, $.01 par value 14,368,919
TABLE OF CONTENTS
PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS. . . . . . . . . . . . . . . . . . . . . . . 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS. . . . . . . . . . . . . . . .12
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK . . . .16
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . . . .18
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . .18
PART I. Financial Information
ITEM 1. FINANCIAL STATEMENTS
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
ASSETS
(Unaudited)
December 31, June 30,
2001 2002
---- ----
CURRENT ASSETS:
Cash $ 7,225 $ 4,368
Accounts receivable-
Oil and gas sales 7,731 11,444
Joint interest and other, net 10,526 8,796
Inventories 6,321 6,863
Prepaid expenses 487 309
--------- ---------
Total current assets 32,290 31,780
--------- ---------
PROPERTY AND EQUIPMENT:
Oil and gas properties at cost, based on successful
efforts accounting
Producing properties 395,559 432,761
Nonproducing leaseholds 50,889 53,087
Gas gathering and processing facilities 28,176 31,148
Service properties, equipment and other 17,427 17,914
--------- ---------
Total property and equipment 492,051 534,910
Less--Accumulated depreciation, depletion and
amortization (174,720) (190,053)
--------- ---------
Net property and equipment 317,331 344,857
--------- ---------
OTHER ASSETS:
Debt issuance costs 4,851 6,517
Other assets 13 13
--------- ---------
Total other assets 4,864 6,530
--------- ---------
Total assets $ 354,485 $ 383,167
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(dollars in thousands, except share data)
LIABILITIES AND STOCKHOLDERS' EQUITY
(Unaudited)
December 31, June 30,
2001 2002
---- ----
CURRENT LIABILITIES:
Accounts payable $ 22,576 $ 18,488
Current debt 5,400 --
Revenues and royalties payable 3,404 4,092
Accrued liabilities and other 9,906 11,146
-------- --------
Total current liabilities 41,286 33,726
-------- --------
LONG-TERM DEBT, net of current portion 177,995 212,650
OTHER NONCURRENT LIABILITIES 91 112
COMMITMENTS AND CONTINGENCIES
STOCKHOLDERS' EQUITY:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, 0 shares issued and outstanding
Common stock, $0.01 par value, 20,000,000 shares
authorized 14,368,919 shares issued and outstanding 144 144
Additional paid-in-capital 25,087 25,087
Retained earnings 109,882 111,448
-------- --------
Total stockholders' equity 135,113 136,679
-------- --------
Total liabilities and stockholders' equity $354,485 $383,167
======== ========
The accompanying notes are an integral part of these consolidated balance
sheets.
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
Three Months Ended June 30,
---------------------------
2001 2002
---- ----
REVENUES:
Oil and gas sales $ 28,605 $ 27,717
Crude oil marketing 72,317 38,442
Risk management income -- (38)
Gathering, marketing and processing 11,434 8,994
Oil and gas service operations 2,054 2,451
--------- ---------
Total revenues 114,410 77,566
--------- ---------
OPERATING COSTS AND EXPENSES:
Production expenses 7,920 7,412
Production taxes 2,287 1,952
Exploration expenses 1,599 1,066
Crude oil marketing purchases and expenses 72,459 38,185
Gathering, marketing and processing 9,737 7,842
Oil and gas service operations 1,621 1,364
Depreciation, depletion and amortization 7,024 8,125
General and administrative 2,878 3,323
--------- ---------
Total operating costs and expenses 105,525 69,269
--------- ---------
OPERATING INCOME 8,885 8,297
--------- ---------
OTHER INCOME AND EXPENSES
Interest income 178 64
Interest expense (3,569) (4,266)
Other income(expense), net 2,170 (3)
--------- ---------
Total other income and (expenses) (1,221) (4,205)
--------- ---------
NET INCOME $ 7,664 $ 4,092
========= =========
EARNINGS PER COMMON SHARE:
Basic $ 0.53 $ 0.28
========= =========
Diluted $ 0.53 $ 0.28
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands, except share data)
Six Months Ended June 30,
-------------------------
2001 2002
---- ----
REVENUES:
Oil and gas sales $ 62,825 $ 50,446
Crude oil marketing 132,416 85,793
Risk management income -- (1,263)
Gathering, marketing and processing 24,424 16,157
Oil and gas service operations 4,065 4,056
--------- ---------
Total revenues 223,730 155,189
--------- ---------
OPERATING COSTS AND EXPENSES:
Production expenses 14,397 13,901
Production taxes 4,915 3,487
Exploration expenses 4,171 3,289
Crude oil marketing purchases and expenses 132,095 85,123
Gathering, marketing and processing 20,299 12,979
Oil and gas service operations 3,049 3,044
Depreciation, depletion and amortization 12,266 16,601
General and administrative 5,381 7,173
--------- ---------
Total operating costs and expenses 196,573 145,597
--------- ---------
OPERATING INCOME 27,157 9,592
--------- ---------
OTHER INCOME AND EXPENSES
Interest income 413 167
Interest expense (7,206) (8,229)
Other income, net 1,986 36
--------- ---------
Total other income and (expenses) (4,807) (8,026)
--------- ---------
NET INCOME $ 22,350 $ 1,566
========= =========
EARNINGS PER COMMON SHARE:
Basic $ 1.56 $ 0.11
========= =========
Diluted $ 1.55 $ 0.11
========= =========
The accompanying notes are an integral part of these consolidated financial
statements.
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
UNAUDITED CONSOLIDATED STATEMENTS OF CASH FLOWS
(dollars in thousands)
Six Months Ended June 30,
-------------------------
2001 2002
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 22,350 $ 1,566
Adjustments to reconcile to net income to
cash provided by operating activities--
Depreciation, depletion and amortization 12,266 16,601
Gain on sale of assets (1,951) (65)
Dry hole cost and impairment of undeveloped leases 1,563 1,697
Other noncurrent assets 293 --
Other noncurrent liabilities (14) 21
Changes in current assets and liabilities--
(Increase)/Decrease in accounts receivable 6,130 (1,984)
(Increase)/Decrease in inventories (688) (542)
(Increase)/Decrease in prepaid expenses (116) 178
Increase/(Decrease) in accounts payable (2,637) (4,088)
Increase/(Decrease) in revenues and royalties payable (1,767) 688
Increase/(Decrease) in accrued liabilities and other (300) 1,240
-------- --------
Net cash provided by operating activities 35,129 15,312
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Exploration and development (29,148) (41,643)
Gas gathering and processing facilities and
service properties, equipment and other (2,148) (3,624)
Purchase of oil and gas properties -- (55)
Proceeds from sale of assets 2,463 86
Advances to affiliates (1,990) --
-------- --------
Net cash used in investing activities (30,823) (45,236)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from line of credit and other 2,500 98,830
Repayment of Senior Subordinated Notes (3,000) --
Repayment of line of credit and other (3,500) (69,575)
Debt issuance costs -- (2,188)
-------- --------
Net cash provided by (used in) financing activities (4,000) 27,067
-------- --------
NET INCREASE (DECREASE) IN CASH 306 (2,857)
CASH AND CASH EQUIVALENTS, beginning of period 7,150 7,225
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 7,456 $ 4,368
======== ========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 7,335 $ 7,478
The accompanying notes are an integral part of these consolidated financial
statements.
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. CONTINENTAL RESOURCES, INC.'S FINANCIAL STATEMENTS
In the opinion of Continental Resources, Inc. ("CRI" or the "Company") the
accompanying unaudited consolidated financial statements contain all
adjustments, consisting only of normal recurring adjustments, necessary to
present fairly the Company's financial position as of June 30, 2002, and the
results of operations and cash flows for the three and six month periods ended
June 30, 2001 and 2002. The unaudited consolidated financial statements for the
interim periods presented do not contain all information required by accounting
principles generally accepted in the United States. The results of operations
for any interim period are not necessarily indicative of the results of
operations for the entire year. These consolidated financial statements should
be read in conjunction with the consolidated financial statements and notes
thereto included in the Company's annual report on form 10-K for the year ended
December 31, 2001.
On June 19, 2001, the Company formed a new subsidiary, Continental
Resources of Illinois, Inc. ("CRII"), an Oklahoma corporation. On July 9, 2001,
the Company, through CRII, purchased the assets of Farrar Oil Company, Inc.
2. ACQUISITIONS:
On July 9, 2001, the Company's subsidiary, CRII, purchased the assets of
Farrar Oil Company, Inc. for $33.7 million using funds borrowed under the
Company's credit facility. The CEO of CRI was on the board of directors of
Farrar Oil Company, Inc. for many years and was familiar with their operations.
The Company purchased Farrar Oil Company, Inc. for two reasons: 1.) to expand
its operating base to the Illinois Basin and 2.) because approximately $8.0
million of the purchase price was for additional interest in wells located in
Oklahoma already operated by CRI. This purchase was accounted for as a purchase
and the cost of the acquisition was allocated to the acquired assets and
liabilities. The operations of Farrar Oil Company, Inc., since July 9, 2001, are
included in the accompanying financial statements. The allocation of the $33.7
million of purchase price on July 9, 2001, was as follows:
Current assets $ 950
Producing properties 30,603
Non-producing properties 1,117
Service properties 1,000
--------
$ 33,670
The unaudited pro forma information set forth below includes the operations
of Farrar Oil Company, Inc. assuming the acquisition of Farrar Oil Company, Inc.
by CRII occurred on January 1, 2001. The unaudited pro forma information is
presented for information purposes only and is not necessarily indicative of the
results of operations that actually would have been achieved had the acquisition
been consummated at that time:
Pro Forma
Three Months Ended June 30, 2001
- -------------------------------------------- -------------------------------------------------------
($ in thousands, except per share data) Farrar CRI Consolidated
- -------------------------------------------- -------------------- ----------------- ----------------
Revenue $5,602 $114,410 $120,012
Net Income $3,130 $7,664 $10,794
Earnings Per Common Share
Basic $0.22 $0.53 $0.75
Diluted $0.22 $0.53 $0.75
Pro Forma
Six Months Ended June 30, 2001
- -------------------------------------------- -------------------------------------------------------
($ in thousands, except per share data) Farrar CRI Consolidated
- -------------------------------------------- -------------------- ----------------- ----------------
Revenue $12,269 $223,730 $235,999
Net Income $6,679 $22,350 $29,029
Earnings Per Common Share
Basic $0.46 $1.56 $2.02
Diluted $0.46 $1.55 $2.02
3. LONG-TERM DEBT:
Long-term debt as of December 31, 2001, and June 30, 2002, consisted of the
following:
December 31, 2001 June 30, 2002
----------------- -------------
(dollars in thousands)
Senior Subordinated Notes $127,150 $127,150
Credit Facility 56,245 85,000
Note payable to principal stockholder -- 500
-------- --------
Outstanding debt 183,395 212,650
Less current portion 5,400 --
-------- --------
Total long-term debt $177,995 $212,650
======== ========
During the quarter ended March 31, 2002, the Company executed a Fourth
Amended and Restated Credit Agreement in which a group of lenders agreed to
provide a $175.0 million senior secured revolving credit facility with a current
borrowing base of $140.0 million. Borrowings under the credit facility are
secured by liens on all oil and gas properties and associated assets of the
Company. Borrowings under the credit facility bear interest, payable quarterly,
at (a) a rate per annum equal to the rate at which eurodollar deposits for one,
two, three or six months are offered by the lead bank plus a margin ranging from
150 to 200 basis points, or (b) at the lead bank's reference rate plus an
applicable margin ranging from 25 to 50 basis points. The Company paid
approximately $2.2 million in debt issuance fees for the new credit facility.
The credit facility matures on March 28, 2005. As of June 30, 2002, the Company
had $85.0 million outstanding debt on its line of credit.
Subsequent to June 30, 2002, the Company has drawn $10.0 million on its
line of credit and currently has $95.0 million outstanding debt on its line of
credit.
4. RISK MANAGEMENT
The risk management process we have established is designed to measure both
quantitative and qualitative risks in our businesses. We are exposed to market
risk, including changes in interest rates and certain commodity prices.
To manage the volatility relating to these exposures, periodically we enter
into various derivative transactions pursuant to our policies on hedging
practices. Derivative positions are monitored using techniques such as
mark-to-market valuation and value-at-risk and sensitivity analysis.
We have recorded a loss of $1.3 million on the income statement to reflect
the mark-to-market exposure at June 30, 2002, and the offset is in accrued
liabilities on the balance sheet. The crude oil financial contract pays us
$24.25 per barrel anytime the NYMEX price is above $19.00 per barrel. If the
NYMEX settlement is $19.00 per barrel or below, we sell our barrels at that
price. This contract is for 30,000 barrels a month and is effective from April
2002 to December 2003.
5. CRUDE OIL MARKETING:
The Company enters into third party contracts to purchase and resell crude
oil at prices based on current month NYMEX prices, current posting prices or at
a stated contract price. Purchases and sales are recorded at the stated contract
price. During the quarter ended June 30, 2002, the Company had revenues from the
sale of crude oil and expenses for the purchase of crude oil of $38.4 million
and $38.2 million, respectively, resulting in a gain from crude oil marketing
activities during the quarter of $0.2 million.
The Company accounts for its crude oil marketing activities in accordance
with EITF 98-10 "Accounting for Energy Trading and Risk Management Activities."
This statement requires that contracts for the purchase and sale of energy
commodities which are entered into for the purpose of speculating on market
movements or otherwise generating gains from market price differences to be
recorded at their market value, as of the balance sheet date, with any
corresponding gains or losses recorded as income from operations. The Company
has discontinued crude oil trading activities as of May 1, 2002.
In June 2002, the Financial Accounting Standards Board (FASB) issued EITF
02-3 "Accounting for Contracts Involved in Energy Trading and Risk Management
Activities." This statement will require 1.) all mark-to-market gains or losses
arising from energy trading contracts (whether realized or unrealized) to be
shown net in the income statement beginning in the first interim or annual
period ending after July 15, 2002 with reclassification required for all
comparable historical periods presented and 2.) disclosure of energy trading
information similar to the types of disclosures outlined by the SEC in FR-61,
"Commission Statement about Management's Discussion and analysis of Financial
Condition and Results of Operations" beginning in annual periods ending after
July 15, 2002. The Company has determined that the adoption of EITF 02-3 will
have no impact on the Company's net income. It will reduce gross revenue and
total operating expense. The following table shows the restated amounts assuming
the new statement was applied as of June 30, 2002.
For the three months ended For the three months ended
(dollars in thousands) June 30, 2001 June 30, 2002
Reported Restated Reported Restated
----------------- ----------------- ----------------- ------------------
Total Revenues $114,410 $82,995 $77,566 $75,864
Total Operating Expense $105,525 $74,110 $69,269 $67,567
-------- ------- ------- -------
Operating Income $8,885 $8,885 $8,297 $8,297
For the six months ended For the six months ended
(dollars in thousands) June 30, 2001 June 30, 2002
Reported Restated Reported Restated
----------------- ----------------- ----------------- ------------------
Total Revenues $223,730 $172,765 $155,189 $134,803
Total Operating Expense $196,573 $145,608 $145,597 $125,211
-------- -------- -------- --------
Operating Income $27,157 $27,157 $9,592 $9,592
6. EARNINGS PER SHARE
Earnings per common share was computed without any provisions for federal
income taxes since the Company converted to an S-Corporation effective June 1,
1997. Earnings per common share was computed by dividing income available to
common stockholders by the weighted-average number of shares outstanding for the
period. The weighted-average number of shares used to compute earnings per
common share was 14,368,919 in 2001 and 2002. The weighted-average number of
shares used to compute diluted earnings per share was 14,393,132 for 2001 and
2002. The effect of common stock equivalents at June 30, 2002, was anti-diluted.
7. GUARANTOR SUBSIDIARIES
The Company's wholly owned subsidiaries, Continental Gas, Inc. (CGI),
Continental Resources of Illinois, Inc. (CRII), and Continental Crude Co. (CCC)
have guaranteed the Company's outstanding Senior Subordinated Notes and its bank
line of credit. The following is a summary of the condensed consolidating
financial information of such subsidiaries as of December 31, 2001, and June 30,
2002, and for the three and six month periods ended June 30, 2001 and 2002.
Condensed Consolidating Balance Sheet
as of December 31, 2001
Guarantor
(dollars in thousands) Subsidiaries Parent Eliminations Consolidated
------------ ------ ------------ ------------
Current Assets $ 6,310 $ 51,915 $(25,935) $ 32,290
Noncurrent Assets 42,063 280,143 (11) 322,195
-------- -------- -------- --------
Total Assets $ 48,373 $332,058 $(25,946) $354,485
======== ======== ======== ========
Current Liabilities $ 11,039 $ 38,629 $ (8,382) $ 41,286
Noncurrent Liabilities 17,553 178,086 (17,553) 178,086
Stockholders' Equity 19,781 115,343 (11) 135,113
-------- -------- -------- --------
Total Liabilities and
Stockholders' Equity $ 48,373 $332,058 $(25,946) $354,485
======== ======== ======== ========
- -------------------------------------------------------------------------------
Condensed Consolidated Balance Sheet
as of June 30, 2002
Guarantor
(dollars in thousands) Subsidiaries Parent Eliminations Consolidated
------------ ------ ------------ ------------
Current Assets $ 6,479 $ 48,329 $(23,027) $ 31,781
Noncurrent Assets 43,119 308,281 (14) 351,386
-------- -------- -------- --------
Total Assets $ 49,598 $356,610 $(23,041) $383,167
======== ======== ======== ========
Current Liabilities $ 11,210 $ 29,226 $ (6,711) $ 33,725
Noncurrent Liabilities 16,816 212,262 (16,316) 212,762
Stockholders' Equity 21,572 115,122 (14) 136,680
-------- -------- -------- --------
Total Liabilities and
Stockholders' Equity $ 49,598 $356,610 $(23,041) $383,167
======== ======== ======== ========
- -------------------------------------------------------------------------------
Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2001
Guarantor
(dollars in thousands) Subsidiaries Parent Eliminations Consolidated
------------ ------ ------------ ------------
Total Revenues $ 12,390 $ 102,874 $ (854) $ 114,410
Operating Costs and Expenses (11,537) (94,842) 854 (105,525)
Other Income (Expense) (90) (1,131) 0 (1,221)
--------- --------- --------- ---------
Net Income $ 763 $ 6,901 $ 0 $ 7,664
========= ========= ========= =========
- -------------------------------------------------------------------------------
Condensed Consolidating Statements of Operations
For the Three Months Ended June 30, 2002
Guarantor
(dollars in thousands) Subsidiaries Parent Eliminations Consolidated
------------ ------ ------------ ------------
Total Revenues $ 12,701 $ 64,938 $ (73) $ 77,566
Operating Costs and Expenses (11,605) (57,737) 73 (69,269)
Other Income (Expense) (418) (3,910) 123 (4,205)
--------- --------- --------- ---------
Net Income $ 678 $ 3,291 $ 123 $ 4,092
========= ========= ========= =========
- -------------------------------------------------------------------------------
Condensed Consolidating Statements of Operations
For the Six Months Ended June 30, 2001
Guarantor
(dollars in thousands) Subsidiaries Parent Eliminations Consolidated
------------ ------ ------------ ------------
Total Revenues $ 26,884 $ 198,984 $ (2,138) $ 223,730
Operating Costs and Expenses (24,265) (174,446) 2,138 (196,573)
Other Income (Expense) (192) (4,615) 0 (4,807)
--------- --------- --------- ---------
Net Income $ 2,427 $ 19,923 $ 0 $ 22,350
========= ========= ========= =========
- -------------------------------------------------------------------------------
Condensed Consolidating Statements of Operations
For the Six Months Ended June 30, 2002
Guarantor
(dollars in thousands) Subsidiaries Parent Eliminations Consolidated
------------ ------ ------------ ------------
Total Revenues $ 23,630 $ 132,439 $ (880) $ 155,189
Operating Costs and Expenses (20,983) (125,494) 880 (145,597)
Other Income (Expense) (860) (7,166) 0 (8,026)
--------- --------- --------- ---------
Net Income (Loss) $ 1,787 $ (221) $ 0 $ 1,566
========= ========= ========= =========
- -------------------------------------------------------------------------------
At June 30, 2002, current liabilities payable to the Company by the
guarantor subsidiaries totaled approximately $22.8 million. For the six months
ended June 30, 2001 and 2002, depreciation, depletion and amortization included
in the guarantor subsidiaries operating costs was approximately $1.0 million and
$2.9 million, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 2002, COMPARED TO THREE MONTHS ENDED JUNE 30, 2001
The following discussion and analysis should be read in conjunction with
our unaudited consolidated financial statements and the notes thereto appearing
elsewhere in this report. Our operating results for the periods discussed may
not be indicative of future performance. In the text below, financial statement
numbers have been rounded; however, the percentage changes are based on
unrounded amounts.
RESULTS OF OPERATIONS
REVENUES
GENERAL
For the current quarter, we had revenues, excluding crude oil marketing, of
$39.1 million, a decrease of $3.0 million, or 7%, from $42.1 million during the
comparable period in 2001. The decrease was mainly attributable to the decrease
in oil and gas prices.
OIL AND GAS SALES
Our oil and gas sales revenue for the three months ended June 30, 2002,
decreased $0.9 million, or 3%, to $27.7 million from $28.6 million during the
comparable period in 2001 due primarily to the decrease in oil and gas prices.
During the three months ended June 30, 2002, we sold 949 MBbls of oil and 2,216
MMcf of natural gas, or 1,319 MBoe compared to sales of 1,180 MBoe for the same
period in 2001.
Our oil revenues, exclusive of hedging activities, for the three months
ended June 30, 2002, increased $3.0 million, or 15%, to $23.0 million from $20.0
million during the same period in 2001. Our oil production increased by 179
MBbls to 950 MBbls, or 23%, for the three months ended June 30, 2002, from 771
MBbls for the comparable period in 2001. Oil prices, exclusive of hedging and
adjustments, decreased $2.46 to an average of $23.46/Bbl, or 9%, during the
three months ended June 30, 2002, from $25.92/Bbl, for the comparable 2001
period.
Our gas revenues decreased $3.2 million, or 37%, to $5.4 million from $8.6
million for the three month period ended June 30, 2002, compared to the same
period in 2001. Our gas production for the period decreased 238 MMcf, or 10%, to
2,216 MMcf from 2,454 MMcf in 2001. Gas prices decreased $1.05 for the three
month period ended June 30, 2002, to an average of $2.45/Mcf, or 30%, from
$3.50/Mcf for the comparable 2001 period.
CRUDE OIL MARKETING
During the three month period ended June 30, 2002, we recognized revenues
on crude oil purchased for resale of $38.4 million, a $33.9 million or 47%
decrease compared to $72.3 million for the three month period ended June 30,
2001. A decrease in volumes and prices made up the difference between 2002 and
2001. We have discontinued crude oil trading as of May 1, 2002. We have
determined that the adoption of EITF 02-3 will have no effect on our net income.
(See Footnote 5).
RISK MANAGEMENT
We have a crude oil financial contract that pays $24.25 per barrel of oil
anytime the NYMEX is between $19.00 and $24.25 per barrel. We have 30,000
barrels a month committed to this contract and the contract is effective from
April 2002 to December 2003. During the three month period ended June 30, 2002,
we recorded a loss of $37,779 in risk management income to reflect the
mark-to-market valuation at June 30, 2002, of this financial derivative.
GATHERING, MARKETING AND PROCESSING
Our gathering, marketing and processing revenue in the second quarter of
2002 was $9.0 million, a decrease of $2.4 million, or 21%, from $11.4 million in
the same period in 2001. This decrease in revenue during the second quarter was
attributable to decreased natural gas and liquid prices in the 2002 period
compared to the 2001 period.
OIL AND GAS SERVICE OPERATIONS
Our oil and gas service operations for the three months ended June 30,
2002, was $2.5 million, an increase of $0.4 million or 19% from $2.1 million for
the three months ended June 30, 2001. The increase was due primarily to greater
volumes of reclaimed oil sales from our central treating unit.
OPERATING COSTS AND EXPENSES
PRODUCTION EXPENSES
Our production expenses decreased by $0.5 million, or 6%, to $7.4 million
during the three months ended June 30, 2002, from $7.9 million during the
comparable period in 2001. The decrease was primarily due to decreases in energy
costs of approximately $0.4 million and decreased labor costs of approximately
$0.1 million offset by an increase in production expenses due to the acquisition
of the assets of Farrar Oil Company, Inc. in July 2001.
PRODUCTION TAXES
Our production taxes decreased by $0.3 million, or 13%, to $2.0 million
during the three months ended June 30, 2002, from $2.3 million during the
comparable period in 2001. The decrease was due to lower oil and gas prices in
the three months ended June 30, 2002, compared to the three months ended June
30, 2001, offset by an increase in production taxes due to the acquisition of
of Farrar Oil Company, Inc. in July 2001.
EXPLORATION EXPENSES
For the three months ended June 30, 2002, our exploration expenses
decreased $0.5 million, or 33%, to $1.1 million from $1.6 million during the
comparable period of 2001. The decrease was mainly due to a reduction in dry
hole expense and seismic expenses.
CRUDE OIL MARKETING
For the three months ended June 30, 2002, we recognized expense for the
purchases of crude oil purchased for resale of $38.2 million, a decrease of
$34.3 million, or 47%, compared to purchases of crude oil for resale of $72.5
million for the three months ended June 30, 2001. The decrease in prices and
volumes made up the difference between 2001 and 2002. We have discontinued crude
oil trading effective May 1, 2002. We have determined that the adoption of EITF
02-3 will have no effect on our net income. (See Footnote 5).
GATHERING, MARKETING, AND PROCESSING
During the three months ended June 30, 2002, we incurred gathering,
marketing and processing expenses of $7.8 million, representing a $1.9 million,
or 19% decrease from the $9.7 million incurred in the second quarter of 2001 due
to lower natural gas and liquids prices on natural gas we purchased for resale.
OIL AND GAS SERVICE OPERATIONS
During the three months ended June 30, 2002, we incurred oil and gas
services operations expenses of $1.4 million, a decrease of $0.2 million, or 16%
from $1.6 million in the second quarter of 2001. The decrease was due to lower
prices paid for the purchase of reclaimed oil.
DEPRECIATION, DEPLETION AND AMORTIZATION (DD&A)
For the three months ended June 30, 2002, our DD&A expense increased $1.1
million, or 16%, to $8.1 million from $7.0 million for the comparable period in
2001. In the second quarter of 2002, DD&A expense on oil and gas properties was
calculated at $5.05 per BOE compared to $4.70 per BOE for the first quarter of
2001. The DD&A expense attributable to the acquisition of the assets of Farrar
Oil Company in July 2001 and lower oil and gas prices resulting in higher
depletion rates were the main causes for the DD&A increase in the 2002 period.
GENERAL AND ADMINISTRATIVE ("G&A")
For the three months ended June 30, 2002, our net G&A expense was $2.8
million, an increase of $0.3 million or 15%, from our net G&A expense of $2.5
million during the comparable period in 2001. Overhead reimbursement of $0.6
million and $0.4 million for 2002 and 2001, respectively, was netted from G&A
expense. The increase was primarily due to increased employment expense offset
by a decrease in legal expense. Our G&A expenses per Boe for the second quarter
of 2002 was $2.17 compared to $2.13 for the second quarter of 2001.
INTEREST EXPENSE
For the three months ended June 30, 2002, our interest expense increased
$0.7 million, or 19% to $4.3 million from $3.6 million for the three months
ended June 30, 2001. The increase was due to additional interest paid on our
credit facility due to higher average debt balances outstanding.
OTHER INCOME
Our other income for the three months ended June 30, 2002, was income of
$0.06 million compared to income of $2.2 for the same period in 2001. The 2001
income was from the sale of 62 uneconomical properties at the Clearinghouse
Auction on April 11, 2001.
NET INCOME
For the three months ended June 30, 2002, our net income was $4.1 million,
a decrease in net income of $3.5 million, or 46%, from $7.6 million for the
comparable period in 2001. The decrease in net income was due primarily to lower
oil and gas prices.
SIX MONTHS ENDED JUNE 30, 2002, COMPARED TO SIX MONTHS ENDED JUNE 30, 2001.
REVENUES
GENERAL
Our revenues, excluding crude oil marketing, decreased $21.9 million, or
24%, to $69.4 million during the six months ended June 30, 2002, from $91.3
million during the comparable period in 2001. The decrease is mainly
attributable to lower oil and gas prices.
OIL AND GAS SALES
Our oil and gas sales revenue for the six months ended June 30, 2002,
decreased $12.4 million, or 20%, to $50.4 million from $62.8 million during the
same period in 2001 due to decreased oil and gas prices. During the six months
ended June 30, 2002, we sold 1,887 MBbls of oil and 4,510 MMcf of natural gas,
or 2,639 MBoe compared to sales of 2,304 MBoe for the same period in 2001.
Our oil revenues for the six months ended June 30, 2002, decreased $1.2
million, or 3%, to $41.4 million from $42.6 million in the same period in 2001.
Our oil production increased by 292 MBbls to 1,887 MBbls, or 18%, for the six
months ended June 30, 2002, from 1,594 MBbls for the same period in 2001. Oil
prices, exclusive of hedging and adjustments, decreased to an average of
$21.56/Bbl, or 19%, during the six months ended June 30, 2002, from $26.71/Bbl,
for the comparable 2001 period. The decrease in oil sales is due to lower oil
prices in 2002.
Our gas revenues for the six months ended June 30, 2002, decreased $10.5
million, or 51%, to $9.8 million from $20.3 million in the same period in 2001.
Our gas production for the period increased 252 MMcf, or 6%, to 4,510 MMcf from
4,258 MMcf in 2001. Gas prices decreased to an average of $2.16/Mcf, or 54%,
from $4.73/Mcf, for the comparable 2001 period. The decrease in gas revenues is
due to lower prices in 2002.
CRUDE OIL MARKETING AND PROCESSING
For the year to date period ended June 30, 2002, we have recognized $85.8
million, a $46.6 million decrease on crude oil purchased for resale compared to
$132.4 million for the six months ended June 30, 2001. A decrease in volumes and
prices made up the difference between 2002 and 2001. We have discontinued crude
oil trading as of May 1, 2002 and determined that the adoption of EITF 02-3 will
have no effect on our net income. (See Footnote 5).
RISK MANAGEMENT
For the six months ended June 30, 2002, we have recorded a loss of $1.2
million to reflect the mark-to-market valuation of a financial derivative
effective from April 2002 to December 2003. For April and May the realized loss
was $141,000 and the remaining $1.1 million loss is unrealized.
GATHERING, MARKETING AND PROCESSING
Our gathering, marketing and processing revenue for the six months ended
June 30, 2002, was $16.2 million, a $8.2 million, or 34% decrease, from $24.4
million in the comparable 2001 period. The decrease for the six month period was
due to lower natural gas and liquid prices in 2002.
OIL AND GAS SERVICE OPERATIONS
Our oil and gas service operations remained constant for the six months
ended June 30, 2002 and 2001, at $4.1 million.
COSTS AND EXPENSES
PRODUCTION EXPENSES
Our production expenses decreased by $0.5 million, or 3%, to $13.9 million
for the six months ended June 30, 2002, from $14.4 million during the comparable
period in 2001. The decrease was primarily due to a decrease in energy and labor
costs of approximately $1.2 million offset by an increase in repairs of $0.8
million.
PRODUCTION TAXES
Our production taxes for the six months ended June 30, 2002, decreased $1.4
million, or 29%, to $3.5 million compared to $4.9 million in the comparable
period of 2001. The decrease was due to lower oil and gas prices in 2002
compared to 2001.
EXPLORATION EXPENSES
Our expense for the six months ended June 30, 2002, decreased $0.9 million,
or 21%, to $3.3 million from $4.2 million incurred in the comparable period in
2001. The decrease was due primarily to a $1.6 million decrease in dry hole
expenses and plugging costs offset by an increase of $0.7 million in expired
leases.
CRUDE OIL MARKETING
For the six month period ended June 30, 2002, our purchases of crude oil
decreased by $46.9 million, or 35%, to $85.1 million from $132.0 million for the
same period in 2001. The decrease in prices and volumes made up the difference
between 2001 and 2002. We have discontinued crude oil trading as of May 1, 2002.
We have determined that the adoption of EITF 02-3 will have no effect on our net
income. (See Footnote 5).
GATHERING, MARKETING AND PROCESSING
Our gathering, marketing and processing expenses for the six months ended
June 30, 2002, were $13.0 million, a $7.3 million, or 36% decrease, from $20.3
million in the same period in 2001 due to lower natural gas and liquids prices
on natural gas purchased for resale.
OIL AND GAS SERVICE OPERATIONS
Our oil and gas service operations expenses remained constant at $3.0
million for the six months ended June 30, 2002 and 2001.
DEPRECIATION, DEPLETION AND AMORTIZATION (DD&A)
For the six months ended June 30, 2002, our DD&A expense increased $4.3
million, or 35% to $16.6 million from $12.3 million for the same period in 2001.
The increase is primarily due to the acquisition of Farrar Oil Company in July
2001 and lower product prices which shortens the life of the properties and
increases depletion rates.
GENERAL AND ADMINISTRATIVE ("G&A")
For the six month period ended June 30, 2002, our net G&A expense was $7.2
million, an increase of $1.8 million, or 33%, from our net G&A expense of $5.4
million during the comparable period in 2001. Overhead reimbursement of $1.2
million and $0.9 million for 2002 and 2001, respectively, was netted from G&A
expense. Our G&A expense per Boe for the first six months of 2001 was $2.26
compared to $1.96 for the same period in 2001. The increase was primarily due to
increased employment expense and geological expense offset by a decrease in
legal expense.
INTEREST EXPENSE
For the six months ended June 30, 2002, our interest expense increased $1.0
million, or 14% to $8.2 million from $7.2 million for the same period in 2001.
The increase was due to additional interest paid on our credit facility due to
higher average debt balances outstanding.
OTHER INCOME
Our other income for the year to date ended June 30, 2002, was $0.2 million
compared to $2.0 million for the year to date ended June 30, 2001. The decrease
reflects the sale of 62 uneconomical wells at the Clearinghouse Auction on April
11, 2001, which was approximately $2.0 million and a gain on the repurchase of
our senior subordinated notes of $0.1 million offset by other miscellaneous
expenses.
NET INCOME
For the six months ended June 30, 2002, our net income was $1.6 million, a
decrease in net income of $20.7 million, or 93%, from $22.3 million for the
comparable period in 2001. The decrease in net income was mainly due to lower
oil and gas prices and increased DD&A and G&A expenses of $3.9 million and $1.8
million, respectively.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW FROM OPERATIONS
Net cash provided by our operating activities for the six months ended June
30, 2002, was $15.3 million, a decrease of $19.8 million, or 56%, from $35.1
million provided by operating activities during the comparable 2001 period. We
had cash at June 30, 2002, of $4.4 million, a decrease of $2.8 million, or 39%,
of the balance of $7.2 million held at December 31, 2001.
DEBT
Our long-term debt at December 31, 2001, was $178.0 million and at June 30,
2002, was $212.6 million. During the first quarter of 2002, we entered into a
Fourth Amended and Restated Credit Agreement in which our syndicated bank group
agreed to provide a $175.0 million senior secured revolving credit facility with
a current borrowing base of $140.0 million. We had $85.0 million of outstanding
debt under this credit facility at June 30, 2002. Subsequent to June 30, 2002,
we borrowed $10.0 million against our credit facility, increasing the
outstanding debt to $95.0 million.
CREDIT FACILITY
Long-term debt outstanding at June 30, 2002, included $85.0 million of
revolving credit debt under our bank credit facility. The effective rate of
interest under our bank credit facility was 4.00% at June 30, 2002. Our credit
facility, which matures March 28, 2005, charges interest based on a rate per
annum equal to the rate at which eurodollar deposits for one, two, three or six
months are offered by the lead bank plus an applicable margin ranging from 150
to 250 basis points or the lead bank's reference rate plus an applicable margin
ranging from 25 to 50 basis points. The borrowing base of our credit facility is
$140.0 million and is re-determined semi-annually.
CAPITAL EXPENDITURES
Our 2002 capital expenditures budget is $91.3 million, exclusive of
acquisitions. The Cedar Hills Field secondary recovery will account for $65.0
million, or 71%, of our projected capital expenditures for 2002. This includes
$40.9 million for drilling injector wells and $24.1 million for compressors,
equipment and facilities. During the six months ended June 30, 2002, we incurred
$45.3 million of capital expenditures, exclusive of acquisitions, compared to
$31.3 million, exclusive of acquisitions, in the six month period of 2001. The
$14.0 million, or 45% increase was the result of our increased drilling activity
in the Rocky Mountain and Gulf Coast regions. We expect to fund the remainder of
our 2002 capital budget through cash flow from operations and borrowings under
our credit facility.
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
This report includes "forward-looking statements". All statements other
than statements of historical fact, including, without limitation, statements
contained under "Management's Discussion and Analysis of Financial Condition and
Results of Operations" regarding the Company's financial position, business
strategy, plans and objectives of management for future operations and industry
conditions, are forward-looking statements. Although we believe that the
expectations reflected in such forward-looking statements are reasonable, we can
give no assurance that such expectations will prove to have been correct.
Important factors that could cause actual results to differ materially from our
expectations ("Cautionary Statements") include, without limitation, future
production levels, future prices and demand for oil and gas, results of future
exploration and development activities, future operating and development cost,
the effect of existing and future laws and governmental regulations (including
those pertaining to the environment) and the political and economic climate of
the United States as discussed in this quarterly report and the other documents
we filed with the Securities and Exchange Commission. All subsequent written and
oral forward-looking statements attributable to us or persons acting on our
behalf are expressly qualified in their entirety by the Cautionary Statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
We are exposed to market risk in the normal course of our business
operations. Our management believes that we are well positioned with our mix of
oil and gas reserves to take advantage of future price increases that may occur.
However, the uncertainty of oil and gas prices continues to impact the domestic
oil and gas industry. Due to the volatility of oil and gas prices, we, from time
to time, have used derivative hedging and may do so in the future as a means of
controlling our exposure to price changes. Most of our purchases are made at
either a NYMEX based price or a fixed price. Forward sales contracts that will
result in the physical delivery of our production are deemed to be normal course
of business sales and are not accounted for as derivatives. As of June 30, 2002,
we had the following fixed physical sales contracts in order to mitigate our
price risk exposure on our production:
Time Period Barrels per Month Price per Barrel
----------- ----------------- ----------------
11/01-03/03 60,000 $21.98
07/02-06/03 30,000 $24.01
07/02-01/04 30,000 $24.01
09/02-12/03 30,000 $25.08
09/02-12/03 30,000 $24.85
RISK MANAGEMENT
The risk management process we have established is designed to measure both
quantitative and qualitative risks in our businesses. We are exposed to market
risk, including changes in interest rates and certain commodity prices.
To manage the volatility relating to these exposures, periodically we enter
into various derivative transactions pursuant to our policies on hedging
practices. Derivative positions are monitored using techniques such as
mark-to-market valuation and value-at-risk and sensitivity analysis.
COMMODITY PRICE EXPOSURE
The market risk inherent in our market risk-sensitive instruments and
positions is the potential loss in value arising from adverse changes in our
commodity prices.
The prices of crude oil, natural gas, and natural gas liquids are subject
to fluctuations resulting from changes in supply and demand. To partially reduce
price risk caused by these market fluctuations, we may hedge (through the
utilization of derivatives) a portion of our production and sale contracts.
Because the commodities covered by these derivatives are substantially the same
commodities that we buy and sell in the physical market, no special studies
other than monitoring the degree of correlation between the derivative and cash
markets, are deemed necessary.
A sensitivity analysis has been prepared to estimate the price exposure to
the market risk of our crude oil, natural gas and natural gas liquids commodity
positions. Our daily net commodity position consists of crude inventories,
commodity purchase and sales contracts and derivative commodity instruments. The
fair value of such position is a summation of the fair values calculated for
each commodity by valuing each net position at quoted futures prices. Market
risk is estimated as the potential loss in fair value resulting from a
hypothetical 10 percent adverse change in such prices over the next 12 months.
Based on this analysis, we estimate the potential market risk loss, assuming a
hypothetical 10 percent adverse change, to be approximately $4.7 million related
to our crude trading or hedging portfolios.
In June 1998, the Financial Accounting Standards Board ("FASB") issued
statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for
Derivative Instruments and for Hedging Activities", with an effective date for
periods beginning after June 15, 1999. In July 1999 the FASB issued SFAS No.
137, "Accounting for Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FASB Statement No. 133". As a result of SFAS No. 137,
adoption of SFAS No. 133 is now required for financial statements for periods
beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities",
which amends the accounting and reporting standards of SFAS No. 133 for certain
derivative instruments and hedging activities. SFAS No. 133 sweeps in a broad
population of transactions and changes the previous accounting definition of a
derivative instrument. Under SFAS No. 133 every derivative instrument is
recorded on the balance sheet as either an asset or liability measured at its
fair value. SFAS No. 133 requires that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting criteria are
met. During 2000, management reviewed all of our contracts to identify both
freestanding and embedded derivatives which meet the criteria set forth in SFAS
No. 133 and SFAS No. 138. We adopted the new standards effective January 1,
2001. We had no outstanding hedges or derivatives which had not been previously
marked to market through our accounting for trading activity. As a result, the
adoption of SFAS No. 133 and SFAS No. 138 had no significant impact.
INTEREST RATE RISK
Our exposure to changes in interest rates relates primarily to long-term
debt obligations. We manage our interest rate exposure by limiting our
variable-rate debt to a certain percentage of total capitalization and by
monitoring the effects of market changes in interest rates. 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 are used solely to modify interest rate exposure and not to modify
the overall leverage of the debt portfolio. The fair value of long-term debt is
estimated based on quoted market prices and management's estimate of current
rates available for similar issues. The following table itemizes our long-term
debt maturities and the weighted-average interest rates by maturity date.
- -------------------------------------------------------------------------------------------------------------------
2001
(dollars in thousands) 2002 2003 2004 2005 Thereafter Total Fair Value
- -------------------------------------------------------------------------------------------------------------------
Fixed rate debt:
Principal amount $127,150 $127,150 $127,150
Weighted-average
interest rate 10.25% 10.25% --
Variable-rate debt:
Principal amount -- -- -- $85,000 -- $85,000 $85,000
Weighted-average
interest rate -- -- -- 4.0% -- 4.0% --
- -------------------------------------------------------------------------------------------------------------------
PART II. Other Information
ITEM 1. LEGAL PROCEEDINGS
From time to time, we are party to litigation or other legal proceedings
that we consider to be a part of the ordinary course of our business. We are not
involved in any legal proceedings nor are we party to any pending or threatened
claims that could reasonably be expected to have a material adverse effect on
our financial condition or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a.) Exhibits:
DESCRIPTION
2.1 Agreement and Plan of Recapitalization of Continental Resources, Inc.
dated October 1, 2000. [2.1](4)
3.1 Amended and Restated Certificate of Incorporation of Continental
Resources, Inc. [3.1](1)
3.2 Amended and Restate Bylaws of Continental Resources, Inc. [3.2](1)
3.3 Certificate of Incorporation of Continental Gas, Inc. [3.3](1)
3.4 Bylaws of Continental Gas, Inc., as amended and restated. [3.4](1)
3.5 Certificate of Incorporation of Continental Crude Co. [3.5](1)
3.6 Bylaws of Continental Crude Co. [3.6](1)
4.1 Restated Credit Agreement dated April 21, 2000 among Continental
Resources, Inc. and Continental Gas, Inc., as Borrowers and MidFirst
Bank as Agent (the "Credit Agreement"). [4.4](3)
4.1.1 Form of Consolidated Revolving Note under the Credit Agreement. [4.4]
(3)
4.1.2 Second Amended and Restated Credit Agreement among Continental
Resources, Inc., Continental Gas, Inc. and Continental Resources of
Illinois, Inc., as Borrowers, and MidFirst Bank, dated July 9,
2001. [10.1](5)
4.1.3 Third Amended and Restated Credit Agreement among Continental
Resources, Inc., Continental Gas, Inc. and Continental Resources of
Illinois, Inc., as Borrowers, and MidFirst Bank, dated January 17,
2002. [4.13](7)
4.1.4 Fourth Amended and Restated Credit Agreement dated March 28, 2002,
among the Registrant, Union Bank of California, N.A., Guaranty Bank,
FSB and Fortis Capital Corp. [10.1](8)
4.3 Indenture dated as of July 24, 1998 between Continental Resources,
Inc., as Issuer, the Subsidiary Guarantors named therein and the
United States Trust Company of New York, as Trustee. [4.3](1)
10.1 Unlimited Guaranty Agreement dated March 28, 2002. [10.2](8)
10.2 Security Agreement dated March 28, 2002, between Registrant and
Guaranty Bank, FSB, as Agent. [10.3](8)
10.3 Stock Pledge Agreement dated March 28, 2002, between Registrant and
Guaranty Bank, FSB, as Agent. [10.4](8)
10.4 Conveyance Agreement of Worland Area Properties from Harold G. Hamm,
Trustee of the Harold G. Hamm Revocable Intervivos Trust dated April
23, 1984 to Continental Resources, Inc. [10.4](2)
10.5 Purchase Agreement signed January 2000, effective October 1, 1999, by
and between Patrick Energy Corporation as Buyer and Continental
Resources, Inc. as Seller. [10.5](2)
10.6+ Continental Resources, Inc. 2000 Stock Option Plan. [10.6](4)
10.7+ Form of Incentive Stock Option Agreement. [10.7](4)
10.8+ Form of Non-Qualified Stock Option Agreement. [10.8](4)
10.9 Purchase and Sales Agreement between Farrar Oil Company and Har-Ken
Oil Company, as Sellers, and Continental Resources of Illinois, Inc.
as Purchaser, dated May 14, 2001. [2.1](5)
10.10 Collateral Assignment of Contracts dated March 28, 2002, between
Registrant and Guaranty Bank, FSB, as Agent. [10.5](8)
12.1 Statement re computation of ratio of debt to Adjusted EBITDA.
[12.1](7)
12.2 Statement re computation of ratio of earning to fixed charges.
[12.2](7)
12.3 Statement re computation of ratio of Adjusted EBITDA to interest
expense. [12.3](7)
21.0 Subsidiaries of Registrant. [21](6)
99.1 Letter to the Securities and Exchange Commission dated March 28, 2002,
regarding the audit of the Registrant's financial statements by Arthur
Andersen LLP. [99.1](7)
_________________________
+ Represents management compensatory plans or agreements
(1) Filed as an exhibit to the Company's Registration Statement on Form S-4, as
amended (No. 333-61547) which was filed with the Securities and Exchange
Commission. The exhibit number is indicated in brackets and is incorporated
herein by reference.
(2) Filed as an exhibit to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1999. The exhibit number is indicated in
brackets and is incorporated herein by reference.
(3) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 31, 2000. The exhibit number is indicated in
brackets and is incorporated herein by reference.
(4) Filed as an exhibit to the Company's Quarterly Report on Form 10-K for the
fiscal quarter ended December 31, 2000. The exhibit number is indicated in
brackets and is incorporated herein by reference.
(5) Filed as an exhibit to current report on Form 8-K dated July 18, 2001. The
exhibit number is indicated in brackets and is incorporated herein by
reference.
(6) Filed as an exhibit to the Company's Quarterly Report on Form 10-Q for the
fiscal quarter ended June 30, 2001. The exhibit number is indicated in
brackets and is incorporated herein by reference.
(7) Filed as an exhibit to the Company's Annual report on Form 10-K for the
fiscal year ended December 31, 2001. The exhibit number is indicated in
brackets and is incorporated herein by reference.
(8) Filed as an exhibit to current report on Form 8-K dated April 11, 2002. The
exhibit number is indicated in brackets and is incorporated herein by
reference.
(b.) REPORTS ON FORM 8-K:
On July 18, 2001, the Registrant filed a current report on Form 8-K
describing the purchase of certain oil and gas properties from Farrar Oil
Company and Har-Ken Oil Company, and the Second Amended and Restated Credit
Agreement with MidFirst Bank. On April 11, 2002, the Registrant filed a current
report on Form 8-K describing the execution of the Fourth Amended and Restated
Credit Agreement. On July 19, 2002, the Registrant filed a current report on
Form 8-K describing the dismissal of Arthur Andersen LLP and appointment of
Ernst and Young LLP as its new independent auditors.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Company
has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.
CONTINENTAL RESOURCES, INC.
ROGER V. CLEMENT
Roger V. Clement
Senior Vice President
(Chief Financial Officer)
Date: August 14, 2002
INDEX TO EXHIBITS
Exhibit
No. Description Method of Filing
- ------- ----------- ----------------
2.1 Agreement and Plan of Incorporated herein by reference
Recapitalization of Continental
Resources, Inc. dated October 1,
2000.
3.1 Amended and Restated Certificate of Incorporated herein by reference
Incorporation of Continental
Resources, Inc.
3.2 Amended and Restate Bylaws of Incorporated herein by reference
Continental Resources, Inc.
3.3 Certificate of Incorporation of Incorporated herein by reference
Continental Gas, Inc.
3.4 Bylaws of Continental Gas, Inc., as Incorporated herein by reference
amended and restated.
3.5 Certificate of Incorporation of Incorporated herein by reference
Continental Crude Co.
3.6 Bylaws of Continental Crude Co. Incorporated herein by reference
4.1 Restated Credit Agreement dated April Incorporated herein by reference
21, 2000 among Continental Resources,
Inc. and Continental Gas, Inc., as
Borrowers and MidFirst Bank as Agent
(the "Credit Agreement").
4.1.1 Form of Consolidated Revolving Note Incorporated herein by reference
under the Credit Agreement.
4.1.2 Second Amended and Restated Credit Incorporated herein by reference
Agreement among Continental
Resources, Inc., Continental Gas,
Inc. and Continental Resources of
Illinois, Inc., as Borrowers, and
MidFirst Bank, dated July 9, 2001.
4.1.3 Third Amended and Restated Credit Incorporated herein by reference
Agreement among Continental
Resources, Inc., Continental Gas,
Inc. and Continental Resources of
Illinois, Inc., as Borrowers, and
MidFirst Bank, dated January 17,
2002.
4.1.4 Fourth Amended and Restated Credit Incorporated herein by reference
Agreement dated March 28, 2002, among
the Registrant, Union Bank of
California, N.A., Guaranty Bank, FSB
and Fortis Capital Corp.
4.3 Indenture dated as of July 24, 1998 Incorporated herein by reference
between Continental Resources, Inc.,
as Issuer, the Subsidiary Guarantors
named therein and the United States
Trust Company of New York, as
Trustee.
10.1 Unlimited Guaranty Agreement dated Incorporated herein by reference
March 28, 2002.
10.2 Security Agreement dated March 28, Incorporated herein by reference
2002, between Registrant and Guaranty
Bank, FSB, as Agent.
10.3 Stock Pledge Agreement dated March Incorporated herein by reference
28, 2002, between Registrant and
Guaranty Bank, FSB, as Agent.
10.4 Conveyance Agreement of Worland Area Incorporated herein by reference
Properties from Harold G. Hamm,
Trustee of the Harold G. Hamm
Revocable Intervivos Trust dated
April 23, 1984 to Continental
Resources, Inc.
10.5 Purchase Agreement signed January Incorporated herein by reference
2000, effective October 1, 1999, by
and between Patrick Energy
Corporation as Buyer and Continental
Resources, Inc. as Seller.
10.6 Continental Resources, Inc. 2000 Incorporated herein by reference
Stock Option Plan.
10.7 Form of Incentive Stock Option Incorporated herein by reference
Agreement.
10.8 Form of Non-Qualified Stock Option Incorporated herein by reference
Agreement.
10.9 Purchase and Sales Agreement between Incorporated herein by reference
Farrar Oil Company and Har-Ken Oil
Company, as Sellers, and Continental
Resources of Illinois, Inc. as
Purchaser, dated May 14, 2001.
10.10 Collateral Assignment of Contracts Incorporated herein by reference
dated March 28, 2002, between
Registrant and Guaranty Bank, FSB, as
Agent.
12.1 Statement re computation of ratio of Incorporated herein by reference
debt to Adjusted EBITDA.
12.2 Statement re computation of ratio of Incorporated herein by reference
earning to fixed charges.
12.3 Statement re computation of ratio of Incorporated herein by reference
Adjusted EBITDA to interest expense.
21.0 Subsidiaries of Registrant.
99.1 Letter to the Securities and Exchange Incorporated herein by reference
Commission dated March 28, 2002,
regarding the audit of the
Registrant's financial statements by
Arthur Andersen LLP.