United States
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event) July 21, 2004
Commission File Number: 333-61547
CONTINENTAL RESOURCES, INC.
(Exact name of registrant as specified in its charter)
Oklahoma 333-61547 73-0767549
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(State or other jurisdiction of (Commission (I.R.S. Employer
incorporation or organization) File Number) Identification No.)
302 N. Independence, Suite 1500, Enid, Oklahoma 73701
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (580) 233-8955
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(Former Name or Former Address if Changed Since Last Report)
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On July 21, 2004, Continental Resources, Inc. ("CRI") completed the sale of all
of the issued and outstanding capital of its subsidiary, Continental Gas, Inc.
("CGI"), to its shareholders, Harold Hamm and Bert H. Mackie, as Trustee of the
Harold Hamm DST Trust (the "DST Trust") and of the Harold Hamm HJ Trust (the
"Buyers") for $22.6 million. The sale was effective as of May 31, 2004. The
purchase price was based on the appraisal of an independent third party
appraiser who also issued an fairness opinion with respect to the financial
terms of the transaction. The assets of CGI included seven gas gathering
systems, three gas-processing plants, and approximately 750 miles of gas
gathering lines, and at the date of the sale, CGI had outstanding indebtedness
under its credit facility of $16.4 million. Immediately prior to the sale, CGI
transferred to CRI all of CGI's interests in the oil and gas properties
previously owned by CGI. In addition, on July 20, 2004, CRI paid a $14.9 million
cash dividend to its shareholders. Also, on July 19, 2004, CRI repurchased
$7,650,000 aggregate principal amount of its outstanding 10-1/4% Senior
Subordinated Notes Due 2008 for a purchase price of $7,650,000 plus accrued but
unpaid interest.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro forma financial information
Continental Resources, Inc. Unaudited Pro Forma Consolidated Financial
Statements
Unaudited Pro Forma Consolidated Balance Sheet as of March 31, 2004
Unaudited Pro Forma Consolidated Statements of Operations for the
year ended December 31, 2003 and for the three months ended March 31,
2004
(c) Exhibits:
10 Stock Purchase Agreement dated July 19, 2004, among
Continental Resources, Inc., Harold Hamm, and Bert H. Mackie,
as Trustee of the Harold Hamm DST Trust and the Harold Hamm HJ
Trust.
Notes to Unaudited Pro Forma Consolidated Financial Statements
CONTINENTAL RESOURCES, INC. UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL
STATEMENTS
The following tables set forth certain pro forma information after giving
effect to the sale of CGI stock and the application of the proceeds therefrom
(the "Sale"). The unaudited pro forma consolidated balance sheet as of March 31,
2004, is based on our unaudited historical consolidated balance sheet as of
March 31, 2004, and gives effect to the Sale as if it had occurred on March 31,
2004. The unaudited pro forma consolidated statement of operations for the year
ended December 31, 2003, has been derived from our audited consolidated
financial statements for the year ended December 31, 2003. The unaudited pro
forma consolidated statement of operations for the three months ended March 31,
2004 gives effect to the Sale as if it had occurred on January 1, 2003. The pro
forma information presented herein does not purport to be indicative of the
financial position or results of operations that would have actually occurred
had the Sale occurred on the dates indicated or which may occur in the future.
All pro forma adjustments are based on preliminary estimates and assumptions and
are subject to revision.
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 2004
(Unaudited, in thousands)
PRO FORMA
-------------------------------------------------
Assets HISTORICAL ADJUSTMENTS PRO FORMA
---------------- --------------- ----------------
Current assets:
Cash and cash equivalents $ 1,968 $ (1,583) $ 385
Accounts receivable:
Oil and gas sales 18,964 (58) 18,906
Joint interest and other, net 11,196 (5,773) 5,423
Inventories 5,168 (153) 5,015
Prepaid expenses 144 (4) 140
Fair value of derivative contracts 40 40
---------------- --------------- ----------------
Total current assets 37,480 (7,571) 29,909
Property and equipment, at cost:
Oil and gas properties, based on
successful efforts accounting 616,546 - 616,546
Gas gathering and processing facilities 50,882 (50,186) 696
Service properties, equipment and other 19,629 (1,579) 18,050
---------------- --------------- ----------------
Total property and equipment 687,057 (51,765) 635,292
Less accumulated depreciation,
depletion and amortization 242,076 (14,015) 228,061
---------------- --------------- ----------------
Net property and equipment 444,981 (37,750) 407,231
Other assets:
Debt issuance costs, net 4,344 (255) 4,089
Other assets 8 (5) 3
---------------- --------------- ----------------
Total other assets 4,352 (260) 4,092
---------------- --------------- ----------------
Total assets $ 486,813 $ (45,581) $ 441,232
================ =============== ================
Liabilities and stockholders' equity
Current liabilities:
Accounts payable $ 26,614 $ (6,843) $ 19,771
Current portion of long-term debt 5,776 (2,429) 3,347
Revenues and royalties payable 7,935 (51) 7,884
Accrued liabilities:
Interest 3,054 - 3,054
Other 6,330 (138) 6,192
Fair value of derivative contracts 1,433 - 1,433
---------------- --------------- ----------------
Total current liabilities 51,142 (9,461) 41,681
Long-term debt, net of current portion 291,199 (13,964) 277,235
Asset retirement obligation 26,891 (371) 26,520
Other noncurrent liabilities 166 - 166
Stockholders' equity:
Preferred stock, $0.01 par value, 1,000,000 shares
authorized, no 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 (10) 25,077
Retained earnings 93,181 (21,775) 71,406
Accumulated other comprehensive income (997) - (997)
---------------- --------------- ----------------
Total stockholders' equity 117,415 (21,785) 95,630
---------------- --------------- ----------------
Total liabilities and stockholders' equity $ 486,813 $ (45,581) $ 441,232
================ =============== ================
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
(Dollars in thousands, unaudited)
Three Months Ended March 31, 2004
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HISTORICAL ADJUSTMENTS PRO FORMA
------------------ ----------------- ----------------
Revenues:
Oil and gas sales $ 36,123 $ - $ 36,123
Crude oil marketing and trading 55,705 - 55,705
Change in derivative fair value (396) - (396)
Gas gathering, marketing and processing 15,865 (15,865) -
Oil and gas service operations 2,114 - 2,114
------------------ ----------------- ----------------
Total revenues 109,411 (15,865) 93,546
Operating costs and expenses:
Production 10,548 - 10,548
Production taxes 2,582 - 2,582
Exploration 2,092 - 2,092
Crude oil marketing and trading 55,863 - 55,863
Gas gathering, marketing and processing 13,808 (13,808) -
Oil and gas service operations 1,946 - 1,946
Depreciation, depletion and amortization of oil and gas properties 10,467 - 10,467
Depreciation and amortization of other property and equipment 1,165 (817) 348
Property impairments 1,897 - 1,897
Asset retirement obligation accretion 277 (4) 273
General and administrative 2,500 (278) 2,222
------------------ ----------------- ----------------
Total operating costs and expenses 103,145 (14,907) 88,238
Operating income 6,266 (958) 5,308
Other income (expenses):
Interest income 27 (2) 25
Interest expense (5,289) 194 (5,095)
Other income, net 23 (11) 12
Loss on disposition of assets (35) - (35)
------------------ ----------------- ----------------
Total other income (expense) (5,274) 181 (5,093)
Net income (loss) $ 992 $ (777) $ 215
================== ================= ================
CONTINENTAL RESOURCES, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
(Dollars in thousands)
Year Ended December 31, 2003
-------------------------------------------
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
Revenues: (Unaudited) (Unaudited)
Oil and gas sales $ 138,948 $ - $ 138,948
Crude oil marketing and trading 168,092 - 168,092
Change in derivative fair value 1,455 - 1,455
Gas gathering, marketing and processing 74,459 (74,459) -
Oil and gas service operations 9,114 - 9,114
------------ -------------- -------------
Total revenues 392,068 (74,459) 317,609
Operating costs and expenses:
Production 37,604 - 37,604
Production taxes 10,251 - 10,251
Exploration 17,221 - 17,221
Crude oil marketing 166,731 (68,969) 97,762
Gas gathering, marketing and processing 68,969 - 68,969
Oil and gas service operations 8,046 - 8,046
Depreciation, depletion and amortization of oil and gas
properties 37,329 - 37,329
Depreciation and amortization of other property and equipment 5,038 (3,248) 1,790
Property impairments 8,975 - 8,975
Asset retirement obligation accretion 1,151 - 1,151
General and administrative 11,178 (762) 10,416
------------ -------------- -------------
Total operating costs and expenses 372,493 (72,979) 299,514
Operating income 19,575 (1,480) 18,095
Other income (expenses):
Interest income 108 (7) 101
Interest expense (20,258) 497 (19,761)
Other income, net 197 (3) 194
Gain on disposition of assets 556 33 589
------------- --------------- -------------
Total other income (expense) (19,397) 520 (18,877)
Income before change in accounting principle 178 (960) (782)
Cumulative effect of change in accounting principle 2,162 (1,889) 273
------------- --------------- -------------
Net income (loss) $ 2,340 $ (2,849) $ (509)
============ ============== =============
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: August 5, 2004 Continental Resources, Inc.,
By: ROGER V. CLEMENT
Roger V. Clement
Senior Vice President and
Chief Financial Officer
EXHIBIT INDEX
Exhibit
No. Description Method of Filing
--- ----------- ----------------
10 Stock Purchase Agreement dated July 19, Filed herewith electronically
2004, among Continental Resources, Inc.,
Harold Hamm, and Bert H. Mackie, as
Trustee of the Harold Hamm DST Trust
and the Harold Hamm HJ Trust