CONTINENTAL RESOURCES, INC. The following discussion and analysis should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto included elsewhere in this report and our historical consolidated financial statements and notes included in our Form 10-K for the year endedDecember 31, 2021 . The following discussion and analysis includes forward-looking statements and should be read in conjunction with the risk factors described in Part II, Item 1A. Risk Factors included in this report, if any, and in our Form 10-K for the year endedDecember 31, 2021 , along with Cautionary Statement for the Purpose of the "Safe Harbor" Provisions of the Private Securities Litigation Reform Act of 1995 at the beginning of this report, for information about the risks and uncertainties that could cause our actual results to be materially different than our forward-looking statements.
Overview
We are an independent crude oil and natural gas company engaged in the exploration, development, management, and production of crude oil and natural gas and associated products with properties primarily located in four leading basins inthe United States - the Bakken field ofNorth Dakota andMontana , theAnadarko Basin ofOklahoma , thePermian Basin ofTexas , and thePowder River Basin ofWyoming . Additionally, we pursue the acquisition and management of perpetually owned minerals located in certain of our key operating areas. We derive the majority of our operating income and cash flows from the sale of crude oil, natural gas, and natural gas liquids and expect this to continue in the future. Our common stock trades on theNew York Stock Exchange under the symbol "CLR" and our corporate internet website is www.clr.com.
First Quarter 2022 Highlights
Financial and operating highlights for the first quarter of 2022 are summarized below.
•Generated
•Completed strategic acquisition to further expand our operations in the
•Increased our quarterly fixed dividend by 15% to
•Increased the size of our share repurchase program from
•Repurchased 1.84 million shares at an aggregate cost of$100 million in the 2022 first quarter, bringing cumulative repurchases to 18.81 million shares at an aggregate cost of$541 million . •Announced$250 million strategic investment in Summit Carbon Solutions to fund development of carbon capture and sequestration infrastructure; funded$62.5 million of our commitment in the 2022 first quarter.
•Reduced outstanding debt by
Financial and Operating Metrics
Commodity prices have increased significantly in 2022 compared to 2021 levels resulting from the ongoing rebalancing of crude oil and natural gas supply and demand fundamentals coupled with the disruption of global hydrocarbon markets prompted by the outbreak of military conflict betweenRussia andUkraine . The increase in commodity prices contributed to improved operating results and cash flows in the first quarter of 2022 compared to the first quarter of 2021. Commodity prices remain volatile and unpredictable and our operating results for the 2022 first quarter may not be indicative of future results. Given the uncertainty surrounding theRussia /Ukraine conflict and ongoing volatility in commodity prices, we are unable to predict the extent to which the conflict or other factors will have on the Company's performance during the remainder of 2022 and beyond.
The following table contains financial and operating metrics for the periods presented. Average net sales prices exclude any effect of derivative transactions. Per-unit expenses have been calculated using sales volumes.
20
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Three months ended
2022 2021
Average daily production:
Crude oil (Bbl per day) 194,767 151,852
Natural gas (Mcf per day) (1) 1,074,255 936,540
Crude oil equivalents (Boe per day) 373,810 307,942
Average net sales prices (2):
Crude oil ($/Bbl) $ 90.83 $ 53.09
Natural gas ($/Mcf) (1) $ 6.34 $ 5.56
Crude oil equivalents ($/Boe) $ 65.51 $ 43.11
Crude oil net sales price discount to NYMEX ($/Bbl) $ (3.47) $ (4.52)
Natural gas net sales price premium to NYMEX ($/Mcf) (1) $ 1.43 $ 2.87
Production expenses ($/Boe) $ 4.09 $ 3.35 Production and ad valorem taxes (% of net crude oil and natural gas sales)
7.2 % 7.0 %
Depreciation, depletion, amortization and accretion ($/Boe) $ 13.67 $ 18.35
Total general and administrative expenses ($/Boe) $ 2.23 $ 1.90
(1) Natural gas production volumes, sales volumes, and net sales prices
presented throughout management's discussion and analysis reflect the combined
value for natural gas and natural gas liquids.
(2) See the subsequent section titled Non-GAAP Financial Measures for a
discussion and calculation of net sales prices, which are non-GAAP measures.
Three months ended
Results of Operations
The following table presents selected financial and operating information for the periods presented.
Three months ended March 31,
In thousands 2022 2021
Crude oil, natural gas, and natural gas liquids sales $ 2,274,261 $ 1,247,533
Loss on derivative instruments, net (475,938) (43,507)
Crude oil and natural gas service operations 17,915 11,789
Total revenues 1,816,238 1,215,815
Operating costs and expenses (950,021) (810,117)
Other expenses, net (73,782) (64,895)
Income before income taxes 792,435 340,803
Provision for income taxes (191,084) (80,528)
Net income 601,351 260,275
Net income attributable to noncontrolling interests 3,594 633
Net income attributable to Continental Resources $ 597,757 $ 259,642
Production volumes:
Crude oil (MBbl) 17,529 13,667
Natural gas (MMcf) 96,683 84,289
Crude oil equivalents (MBoe) 33,643 27,715
Sales volumes:
Crude oil (MBbl) 17,461 13,726
Natural gas (MMcf) 96,683 84,289
Crude oil equivalents (MBoe) 33,575 27,774
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Production
The following table summarizes the changes in our average daily Boe production
by major operating area for the first quarter period.
Boe production per day 1Q 2022 1Q 2021 % Change
Bakken 171,401 160,577 7 %
Anadarko Basin 143,963 138,386 4 %
Powder River Basin 11,653 2,464 373 %
Permian Basin 40,248 - - %
All other 6,545 6,515 - %
Total 373,810 307,942 21 %
The following table summarizes the changes in our production by product for the
first quarter period.
Three months ended March 31, Volume
2022 2021 Volume percent
Volume Percent Volume Percent increase increase
Crude oil (MBbl) 17,529 52 % 13,667 49 % 3,862 28 %
Natural gas (MMcf) 96,683 48 % 84,289 51 % 12,394 15 %
Total (MBoe) 33,643 100 % 27,715 100 % 5,928 21 %
The 28% increase in crude oil production in the 2022 first quarter was primarily
driven by our property acquisitions in the Permian Basin and Powder River Basin
over the past year, which increased our 2022 first quarter production by 2,807
MBbls and 657 MBbls, respectively, compared to the 2021 first quarter.
Additionally, crude oil production in the Bakken increased 581 MBbls, or 6%,
compared to the 2021 first quarter due to new well completions over the past
year.
The 15% increase in natural gas production in the 2022 first quarter was due in
part to the previously described property acquisitions over the past year.
Properties acquired in the Permian Basin increased our 2022 first quarter
production by 4,887 MMcf while properties acquired in the Powder River Basin
increased our production by 1,022 MMcf compared to the 2021 first quarter.
Additionally, natural gas production in the Anadarko Basin increased 4,055 MMcf,
or 7%, and production in the Bakken increased 2,359 MMcf, or 8%, over the 2021
first quarter due to new well completions over the past year.
Revenues
Net crude oil, natural gas, and natural gas liquids sales and related net sales prices presented below are non-GAAP measures. See the subsequent section titled Non-GAAP Financial Measures for a discussion and calculation of these measures. Net crude oil, natural gas, and natural gas liquids sales. Net sales totaled$2.20 billion for the first quarter of 2022, an 84% increase compared to net sales of$1.20 billion for the 2021 first quarter due to significant increases in net sales prices and sales volumes as discussed below. Total sales volumes for the first quarter of 2022 increased 5,801 MBoe, or 21%, compared to the 2021 first quarter primarily due to new wells added from our previously described property acquisitions over the past year. For the first quarter of 2022, our crude oil sales volumes increased 27% and our natural gas sales volumes increased 15% compared to the 2021 first quarter. Our crude oil net sales prices averaged$90.83 per barrel in the 2022 first quarter compared to$53.09 per barrel for the 2021 first quarter due to the previously described increase in market prices along with improved price differentials. The differential between NYMEX West Texas Intermediate calendar month prices and our realized crude oil net sales prices improved to an average of$3.47 per barrel for the 2022 first quarter compared to$4.52 per barrel for the 2021 first quarter, reflecting strong price realizations across our assets. Our natural gas net sales prices averaged$6.34 per Mcf for the 2022 first quarter compared to$5.56 per Mcf for the 2021 first quarter due to the previously described increase in market prices. The difference between our net sales prices and NYMEX Henry Hub calendar month natural gas prices was a premium of$1.43 per Mcf for the 2022 first quarter compared to a premium of$2.87 per Mcf for the 2021 first quarter. InFebruary 2021 , severe winter weather and freezing temperatures in the southernUnited States led to a period of increased spot prices for residue natural gas that resulted in a significant improvement in our price realizations compared to benchmark prices in the 2021 first quarter with no similar impact in the 2022 first quarter. 22 -------------------------------------------------------------------------------- Derivatives. The significant improvement in commodity prices during the first quarter of 2022 had a significant unfavorable impact on the fair value of our derivatives, which resulted in negative revenue adjustments of$475.9 million for the period, representing$22.2 million of cash losses and$453.7 million of unsettled non-cash losses. For the 2021 first quarter, we recognized negative revenue adjustments associated with our derivatives totaling$43.5 million resulting from changes in market prices that had an unfavorable impact on the fair value of our derivatives. Crude oil and natural gas service operations. Our crude oil and natural gas service operations consist primarily of revenues associated with water gathering, recycling, and disposal activities, which are impacted by our production volumes and the timing and extent of our drilling and completion projects. Revenues associated with such activities increased$6.1 million , or 52%, from$11.8 million for the first quarter of 2021 to$17.9 million for the first quarter of 2022 due to increased water handling activities resulting from the previously described increase in production volumes compared to the 2021 first quarter, which also produced a corresponding increase in service-related operating expenses in the current period.
Operating Costs and Expenses
Production Expenses. Production expenses increased$44.2 million , or 48%, to$137.3 million for the first quarter of 2022 compared to$93.1 million for the first quarter of 2021 due to an increase in the number of producing wells, the associated 21% increase in total sales volumes, and higher workover-related activities aimed at enhancing production from producing properties prompted by the favorable commodity price environment. Production expenses on a per-Boe basis averaged$4.09 per Boe for the 2022 first quarter compared to$3.35 per Boe for the 2021 first quarter, the increase of which primarily reflects higher workover-related activities. Production and Ad Valorem Taxes. Production and ad valorem taxes increased$74.4 million , or 89%, to$158.4 million for the first quarter of 2022 compared to$84.0 million for the first quarter of 2021 due to the previously described increase in sales. Our production taxes as a percentage of net sales averaged 7.2% for the first quarter of 2022, consistent with 7.0% for the first quarter of 2021. Exploration Expenses. Exploration expenses, which consist primarily of exploratory geological and geophysical costs and dry hole costs that are expensed as incurred, increased$8.4 million to$13.0 million for the first quarter of 2022 compared to$4.6 million for the first quarter of 2021. The 2022 first quarter includes$10.4 million of dry hole costs associated with an unsuccessful exploratory well with no comparable dry hole costs incurred in the prior year period. Depreciation, Depletion, Amortization and Accretion. Total DD&A decreased$50.6 million , or 10%, to$459.0 million for the first quarter of 2022 compared to$509.6 million for the first quarter of 2021 primarily due to a decrease in our DD&A rate per Boe as further discussed below, partially offset by the previously described 21% increase in total sales volumes. The following table shows the components of our DD&A on a unit of sales basis for the periods presented. Three months ended March 31, $/Boe 2022 2021 Crude oil and natural gas$ 13.37 $ 18.03 Other equipment 0.21 0.22 Asset retirement obligation accretion 0.09 0.10 Depreciation, depletion, amortization and accretion $
13.67
Estimated proved reserves are a key component in our computation of DD&A expense. Proved reserves are determined using the unweighted arithmetic average of the first-day-of-the-month commodity prices for the preceding twelve months as required bySEC rules. Holding all other factors constant, if proved reserves are revised downward due to commodity price declines or other reasons, the rate at which we record DD&A expense increases. Conversely, if proved reserves are revised upward, the rate at which we record DD&A expense decreases. Upward revisions of proved reserves at year-end 2021 prompted by a significant increase in average commodity prices and other factors resulted in a decrease in our DD&A rate for crude oil and natural gas properties in the first quarter of 2022 compared to the first quarter of 2021. Property Impairments. Total property impairments increased$12.8 million to$24.2 million for the first quarter of 2022 compared to$11.4 million for the first quarter of 2021, reflecting an$11.8 million proved property impairment recognized in the current period on a property in an emerging play with no proved property impairments being recognized in the prior period. General and Administrative Expenses. Total G&A expenses increased$22.0 million , or 42%, to$74.8 million for the first quarter of 2022 compared to$52.8 million for the first quarter of 2021. 23 -------------------------------------------------------------------------------- Total G&A expenses include non-cash charges for equity compensation of$29.3 million and$16.9 million for the first quarters of 2022 and 2021, respectively. This increase was primarily driven by approximately$10 million of incremental expenses recognized on restricted stock awards whose vesting terms were modified and accelerated in the 2022 first quarter upon the retirement of certain management personnel from the Company. G&A expenses other than equity compensation totaled$45.5 million for the 2022 first quarter, an increase of$9.6 million compared to$35.9 million for the 2021 first quarter primarily due to an increase in payroll costs and employee benefits.
The following table shows the components of G&A expenses on a unit of sales basis for the periods presented.
Three months ended March 31 ,
$/Boe 2022 2021
General and administrative expenses $ 1.36$ 1.29 Non-cash equity compensation 0.87
0.61
Total general and administrative expenses $ 2.23
Interest Expense. Interest expense increased$7.6 million , or 12%, to$72.6 million for the first quarter of 2022 compared to$65.0 million for the first quarter of 2021 due to an increase in our weighted average outstanding debt balance from$5.5 billion for the first quarter of 2021 to$6.8 billion for the first quarter of 2022. This increase was driven by debt incurred in the fourth quarter of 2021 to fund a portion of ourDecember 2021 acquisition of properties in thePermian Basin . Income Taxes. For the first quarters of 2022 and 2021 we provided for income taxes at a combined federal and state tax rate of 24.5% of our pre-tax income. We recorded an income tax provision of$191.1 million for the 2022 first quarter and an income tax provision of$80.5 million for the 2021 first quarter, which resulted in effective tax rates of 24.1% and 23.6%, respectively, after taking into account statutory tax rates, permanent taxable differences, tax effects from equity compensation, changes in valuation allowances, and other items. See Notes to Unaudited Condensed Consolidated Financial Statements-Note 12. Income Taxes for a summary of the sources and tax effects of items comprising our effective tax rates.
Liquidity and Capital Resources
Our primary sources of liquidity have historically been cash flows generated from operating activities, financing provided by our credit facility and the issuance of debt securities. Additionally, asset dispositions and joint development arrangements have provided a source of cash flow for use in reducing debt and enhancing liquidity. We are committed to operating in a responsible manner to preserve financial flexibility, liquidity, and the strength of our balance sheet. AtApril 30, 2022 , we had$55 million in outstanding borrowings and$1.94 billion of borrowing availability under our credit facility, which represents a$180 million increase in availability compared toMarch 31, 2022 . Our credit facility, which is unsecured and has no borrowing base subject to redetermination, does not mature untilOctober 2026 . Based on our planned capital spending, our forecasted cash flows and projected levels of indebtedness, we expect to maintain compliance with the covenants under our credit facility and senior note indentures. Further, based on current market indications, we expect to meet our contractual cash commitments to third parties as ofMarch 31, 2022 , including those subsequently described under the heading Future Capital Requirements, recognizing we may be required to meet such commitments even if our business plan assumptions were to change. We monitor our capital spending closely based on actual and projected cash flows and have the ability to reduce spending or dispose of assets if needed to preserve liquidity and financial flexibility to fund our operations.
Cash Flows
Cash flows from operating activities
Net cash provided by operating activities increased$464 million , or 45%, to$1.50 billion for the first quarter of 2022 compared to$1.04 billion for the first quarter of 2021 driven by a$1.0 billion increase in crude oil, natural gas, and NGL revenues due to the previously described increases in commodity prices and sales volumes in the current period. This increase was partially offset by a$74.0 million increase in production and ad valorem taxes associated with higher revenues and increases in certain other cash operating expenses primarily due to an increase in sales volumes and growth of our Company over the past year, which included a$44.2 million increase in production expenses and a$24.6 million increase in transportation, gathering, processing, and compression expenses. 24 --------------------------------------------------------------------------------
Cash flows from investing activities
Net cash used in investing activities increased$613 million to$1.04 billion for the first quarter of 2022 compared to$428 million for the first quarter of 2021, reflecting our planned increase in budgeted spending and an increase in the magnitude of property acquisitions in the 2022 first quarter. Non-acquisition capital expenditures attributable to us for full year 2022 are budgeted to be between$2.6 billion and$2.7 billion compared to$1.54 billion of non-acquisition capital spending for full year 2021. Our investing cash flows for first quarter 2022 include$403 million paid to acquire properties in thePowder River Basin as discussed in Note 3. Property Acquisitions and$62.5 million paid for the new strategic investment described in Note 13.Equity Investment in Notes to Unaudited Condensed Consolidated Financial Statements.
Cash flows from financing activities
Net cash used in financing activities for the first quarter of 2022 totaled$480.2 million , primarily consisting of$265 million of net repayments on our credit facility,$83 million of cash dividends paid on common stock, and$100 million of cash used to repurchase shares of our common stock. Net cash used in financing activities for the first quarter of 2021 totaled$564.6 million , primarily consisting of$400 million of cash used to redeem a portion of our then-outstanding 2022 Notes inJanuary 2021 and$160 million of net repayments on our credit facility.
Future Sources of Financing
Although we cannot provide any assurance, we believe funds from operating cash flows, our cash balance, and availability under our credit facility should be sufficient to meet our normal operating needs, debt service obligations, budgeted capital expenditures, cash payments for income taxes, and dividend payments for at least the next 12 months and to meet our contractual cash commitments to third parties beyond 12 months. Based on current market indications, our budgeted capital spending plans for 2022 are expected to be funded from operating cash flows. Any deficiencies in operating cash flows relative to budgeted spending are expected to be funded by borrowings under our credit facility. If cash flows are materially impacted by declines in commodity prices, we have the ability to reduce our capital expenditures or utilize the availability of our credit facility if needed to fund our operations and business plans. We may choose to access banking or capital markets for additional financing or capital to fund our operations or take advantage of business opportunities that may arise. Further, we may sell assets or enter into strategic joint development opportunities in order to obtain funding if such transactions can be executed on satisfactory terms. However, no assurance can be given that such transactions will occur.
Credit facility
We have an unsecured credit facility, maturing inOctober 2026 , with aggregate lender commitments totaling$2.0 billion . The commitments are from a syndicate of 12 banks and financial institutions. We believe each member of the current syndicate has the capability to fund its commitment. As ofApril 30, 2022 , we had$1.94 billion of borrowing availability on our credit facility after considering outstanding borrowings and letters of credit. The commitments under our credit facility are not dependent on a borrowing base calculation subject to periodic redetermination based on changes in commodity prices and proved reserves. Additionally, downgrades or other negative rating actions with respect to our credit rating do not trigger a reduction in our current credit facility commitments, nor do such actions trigger a security requirement or change in covenants. Downgrades of our credit rating will, however, trigger increases in our credit facility's interest rates and commitment fees paid on unused borrowing availability under certain circumstances. Our credit facility contains restrictive covenants that may limit our ability to, among other things, incur additional indebtedness, incur liens, engage in sale and leaseback transactions, or merge, consolidate or sell all or substantially all of our assets. Our credit facility also contains a requirement that we maintain a consolidated net debt to total capitalization ratio of no greater than 0.65 to 1.00. See Notes to Unaudited Condensed Consolidated Financial Statements-Note 8. Long-Term Debt for a discussion of how this ratio is calculated pursuant to our credit agreement. We were in compliance with our credit facility covenants atMarch 31, 2022 and expect to maintain such compliance. AtMarch 31, 2022 , our consolidated net debt to total capitalization ratio was 0.41. We do not believe the credit facility covenants are reasonably likely to limit our ability to undertake additional debt financing if needed to support our business. 25 --------------------------------------------------------------------------------
Future Capital Requirements
Our material future cash requirements are summarized below. Based on current market indications, we expect to meet our contractual cash commitments to third parties as ofMarch 31, 2022 , recognizing we may be required to meet such commitments even if our business plan assumptions were to change.
Senior notes
Our debt includes outstanding senior note obligations totaling$6.36 billion atMarch 31, 2022 , exclusive of interest payment obligations thereon. Our senior notes are not subject to any mandatory redemption or sinking fund requirements. The earliest scheduled senior note maturity is our$649.6 million of 2023 Notes due inApril 2023 . We expect to be able to generate or obtain sufficient funds necessary to fully redeem our 2023 Notes prior to maturity. For further information on the face values, maturity dates, semi-annual interest payment dates, optional redemption periods and covenant restrictions related to our senior notes, refer to Note 8. Long-Term Debt in Notes to Unaudited Condensed Consolidated Financial Statements. We were in compliance with our senior note covenants atMarch 31, 2022 and expect to maintain such compliance. We do not believe the senior note covenants will materially limit our ability to undertake additional debt financing. Downgrades or other negative rating actions with respect to the credit ratings assigned to our senior unsecured debt do not trigger additional senior note covenants.
Credit facility borrowings
As ofApril 30, 2022 , we had$55 million of outstanding borrowings on our credit facility, which represents a decrease of$180 million compared to$235 million outstanding atMarch 31, 2022 . Our credit facility matures inOctober 2026 .
Transportation, gathering, and processing commitments
We have entered into transportation, gathering, and processing commitments to guarantee capacity on crude oil and natural gas pipelines and natural gas processing facilities that require us to pay per-unit charges regardless of the amount of capacity used. Future commitments remaining as ofMarch 31, 2022 under the arrangements amount to approximately$1.25 billion . See Note 9. Commitments and Contingencies in Notes to Unaudited Condensed Consolidated Financial Statements for additional information.
Capital expenditures
Our capital expenditures budget for 2022 is expected to be$2.6 billion to$2.7 billion . Costs of acquisitions and investments, such as those described in Note 3. Property Acquisitions and Note 13.Equity Investment in Notes to Unaudited Condensed Consolidated Financial Statements, are not budgeted, with the exception of planned levels of spending for mineral acquisitions. For the three months endedMarch 31, 2022 , we invested$523.9 million in our capital program excluding$443.1 million of unbudgeted acquisitions, excluding$1.9 million of mineral acquisitions attributable to Franco-Nevada, and including$11.0 million of capital costs associated with increased accruals for capital expenditures as compared toDecember 31, 2021 . Our 2022 first quarter capital expenditures were allocated as shown in the table below. In millions 1Q 2022 Exploration and development drilling $ 426.2 Land costs
24.3
Mineral acquisitions attributable to Continental 0.5
Capital facilities, workovers, water infrastructure, and other corporate assets
72.3
Seismic 0.6
Capital expenditures attributable to Continental, excluding unbudgeted acquisitions
523.9
Acquisitions of crude oil and natural gas properties
443.1
Total unbudgeted acquisitions
443.1
Total capital expenditures attributable to Continental $ 967.0
Mineral acquisitions attributable to Franco-Nevada 1.9
Total capital expenditures $ 968.9
Our drilling and completion activities and the actual amount and timing of our
capital expenditures may differ materially from our budget as a result of, among
other things, available cash flows, unbudgeted acquisitions, actual drilling and
completion results, operational process improvements, the availability of
drilling and completion rigs and other services and equipment,
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cost inflation, the availability of transportation, gathering and processing
capacity, changes in commodity prices, and regulatory, technological and
competitive developments. We monitor our capital spending closely based on
actual and projected cash flows and may adjust our spending should commodity
prices materially change from current levels. We expect to continue
participating as a buyer of properties when and if we have the ability to
increase our position in strategic plays at attractive terms.
OnMarch 3, 2022 , we executed a definitive agreement to acquire oil and gas properties in thePermian Basin ofTexas for cash consideration of$200 million , subject to customary closing price adjustments. Closing of the acquisition occurred onApril 15, 2022 , at which time we paid$177.0 million , which reflects customary adjustments made pursuant to the agreement and was in addition to a$20.0 million deposit paid at signing in March.
See Note 13.Equity Investment in Notes to Unaudited Condensed Consolidated Financial Statements for discussion of future spending commitments associated with a new strategic investment made by the Company with Summit Carbon Solutions in the first quarter of 2022.
Cash Payments for Income Taxes
OnApril 14, 2022 , we made a quarterly estimated payment for 2022 U.S. federal income taxes of$125 million based on an estimate of federal taxable income for the year. Significant judgment is involved in estimating future taxable income as we are required to make assumptions about future commodity prices, projected production, development activities, capital spending, profitability, and general economic conditions, all of which are subject to material revision in future periods as better information becomes available. As ofApril 30, 2022 , the publicly available forward commodity strip prices for the remainder of 2022 averaged$97.88 per barrel for crude oil and$7.33 per Mcf for natural gas. If commodity prices remain at these levels for the remainder of the year, we expect to utilize the full amount of our federal net operating loss carryforwards and certain state net operating loss carryforwards and generate significant taxable income in 2022, which would result in us making estimated cash payments for income taxes each quarter in the upcoming year in amounts that could approximate the$125 million quarterly payment made inApril 2022 . Because of the significant uncertainty inherent in numerous factors utilized in projecting taxable income, we cannot predict the amount of future income tax payments with certainty. Dividend Declaration OnApril 27, 2022 , the Company declared a quarterly cash dividend of$0.28 per share on its outstanding common stock, which will be paid onMay 23, 2022 to shareholders of record as ofMay 9, 2022 .
Share repurchase program
InMay 2019 our Board of Directors approved the initiation of a share repurchase program to acquire up to$1 billion of our common stock beginning inJune 2019 . OnFebruary 8, 2022 , our Board of Directors approved an increase in the size of the share repurchase program to$1.5 billion . As of the date of this filing, we have repurchased and retired a cumulative total of approximately 18.81 million shares under the program at an aggregate cost of$540.9 million , leaving$959.1 million of authorized repurchasing capacity under the modified program. The timing and amount of the Company's share repurchases are subject to market conditions and management discretion. The share repurchase program does not require the Company to repurchase a specific number of shares and may be modified, suspended, or terminated by the Board of Directors at any time.
Senior note redemptions and repurchases
In recent periods we have redeemed or repurchased a portion of our outstanding senior notes. From time to time, we expect to execute additional redemptions or repurchases of our senior notes for cash in open market transactions, privately negotiated transactions, or otherwise. Such redemptions or repurchases will depend on prevailing market conditions, our liquidity and prospects for future access to capital, and other factors. The amounts involved in any such transactions, individually or in the aggregate, may be material.
Dakota Access Pipeline
In response to aJuly 2020 U.S. District Court decision vacating theU.S. Army Corps of Engineers ("Corps") grant of an easement to the Dakota Access Pipeline ("DAPL") and issuance of an order requiring the Corps to conduct an environmental impact statement for the pipeline, the Corps is currently conducting the court-ordered environmental review to determine whether DAPL poses a threat to the drinking water supply of theStanding Rock Sioux Reservation . DAPL currently remains in 27 -------------------------------------------------------------------------------- operation. The owners of DAPL appealed the District Court decision to theU.S. Supreme Court inSeptember 2021 , but the appeal was rejected onFebruary 22, 2022 . The Corps continues to conduct the review, which is estimated to be completed no later thanNovember 2022 . Once the review is completed, the Corps will determine whether DAPL is safe to operate or must be shut down. We are unable to determine the outcome or the impact of this matter on DAPL in the future. We utilize DAPL to transport a portion of our Bakken crude oil production to ultimate markets on theU.S. gulf coast . Our transportation commitment on the pipeline totals 30,000 barrels per day which will continue throughFebruary 2026 at which time the commitment decreases to 26,450 barrels per day throughJuly 2028 . If transportation capacity on DAPL becomes restricted or unavailable, we have the ability to utilize other third party pipelines or rail facilities to transport our Bakken crude oil production to market, although such alternatives may be more costly. A restriction of DAPL's takeaway capacity may have an impact on prices for Bakken-produced barrels and result in wider differentials relative to WTI benchmark prices in the future, the amount of which is uncertain.
Legislative and Regulatory Developments
The crude oil and natural gas industry inthe United States is subject to various types of regulation at the federal, state and local levels.President Biden , in pursuit of his regulatory agenda, has issued, and may continue to issue, executive orders that result in more stringent and costly requirements for the domestic crude oil and natural gas industry and there is the potential for the revision of existing laws and regulations or the adoption of new legislation that could adversely affect the oil and gas industry, including those pertaining to the taxation of oil and gas exploration and production activities. Such changes, if enacted, could have a material adverse effect on our results of operations and cash flows. See Part I, Item 1. Business-Regulation of the Crude Oil and Natural Gas Industry in our Form 10-K for the year endedDecember 31, 2021 for a discussion of significant laws and regulations that have been enacted or are currently being considered by regulatory bodies that may affect us in the areas in which we operate.
InMarch 2022 , theSEC proposed rule amendments that would create a wide range of new climate-related disclosure obligations for registrants. The proposed rules would require registrants to include certain climate-related information in registration statements and annual reports, including (i) climate-related risks and their actual or likely material impacts on the registrant's business, strategy, and outlook; (ii) the registrant's governance of climate-related risks and relevant risk management processes; (iii) information on the registrant's greenhouse gas emissions, which, for accelerated and large accelerated filers and with respect to certain emissions, would be subject to assurance; (iv) certain climate-related financial statement metrics and related disclosures in a note to audited financial statements; and (v) information about climate-related targets, goals, and transition plans. The proposed rules remain open to public comment and may be subject to challenges and litigation. Thus, the ultimate scope and impact of the proposed rules on our business remain uncertain. To the extent new rules, if finalized, impose additional reporting obligations on us, we could face increased costs.
Inflation
Certain drilling and completion costs and costs of oilfield services, equipment, and materials decreased in recent years as service providers reduced their costs in response to reduced demand arising from historically low crude oil prices. However, inflationary pressures returned in 2021 and continue to persist in 2022 in conjunction with the significant increase in commodity prices over the past year, labor shortages, and other factors. Additionally, supply chain disruptions stemming from the COVID-19 pandemic have led to shortages of certain materials and equipment and resulting increases in material and labor costs. Our capital spending budget for 2022 includes an estimate for the impact of cost inflation and, despite inflationary pressures, we expect to continue generating significant amounts of free cash flow at current commodity price levels.
Critical Accounting Policies and Estimates
There have been no changes in our critical accounting policies and estimates from those disclosed in our 2021 Form 10-K.
Non-GAAP Financial Measures
Net crude oil, natural gas, and natural gas liquids sales and net sales prices
Revenues and transportation expenses associated with production from our
operated properties are reported separately as discussed in Notes to Unaudited
Condensed Consolidated Financial Statements-Note 5. Revenues. For non-operated
properties, we receive a net payment from the operator for our share of sales
proceeds which is net of costs incurred by the operator, if any. Such
non-operated revenues are recognized at the net amount of proceeds received. As
a result, the separate presentation of
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revenues and transportation expenses from our operated properties differs from
the net presentation from non-operated properties. This impacts the
comparability of certain operating metrics, such as per-unit sales prices, when
such metrics are prepared in accordance with U.S. GAAP using gross presentation
for some revenues and net presentation for others.
In order to provide metrics prepared in a manner consistent with how management
assesses the Company's operating results and to achieve comparability between
operated and non-operated revenues, we have presented crude oil, natural gas,
and natural gas liquids sales net of transportation expenses in Management's
Discussion and Analysis of Financial Condition and Results of Operations, which
we refer to as "net crude oil, natural gas, and natural gas liquids sales," a
non-GAAP measure. Average sales prices calculated using net sales are referred
to as "net sales prices," a non-GAAP measure, and are calculated by taking
revenues less transportation expenses divided by sales volumes. Management
believes presenting our revenues and sales prices net of transportation expenses
is useful because it normalizes the presentation differences between operated
and non-operated revenues and allows for a useful comparison of net realized
prices to NYMEX benchmark prices on a Company-wide basis.
The following tables present a reconciliation of crude oil, natural gas, and
natural gas liquids sales (GAAP) to net crude oil, natural gas, and natural gas
liquids sales and related net sales prices (non-GAAP) for the three months ended
March 31, 2022 and 2021.
Three months ended March 31, 2022 Three months ended March 31, 2021
Natural gas Natural gas
In thousands Crude oil and NGLs Total Crude oil and NGLs Total
Crude oil, natural gas, and NGL
sales (GAAP) $ 1,643,847 $ 630,414 $ 2,274,261 $ 768,768 $ 478,765 $ 1,247,533
Less: Transportation expenses (57,887) (16,962) (74,849) (40,079) (10,177) (50,256)
Net crude oil, natural gas, and
NGL sales (non-GAAP) $ 1,585,960 $ 613,452 $ 2,199,412 $ 728,689 $ 468,588 $1,197,277
Sales volumes (MBbl/MMcf/MBoe) 17,461 96,683 33,575 13,726 84,289 27,774 Net sales price (non-GAAP)$ 90.83 $ 6.34 $ 65.51 $ 53.09 $ 5.56 $ 43.11 29
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