Continental Resources Q4 Results - Feb 18

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dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Continental Resources Q4 Results - Feb 18

Post by dan_s »

OKLAHOMA CITY, Feb. 18, 2019 /PRNewswire/ -- Continental Resources, Inc. (NYSE: CLR) (the Company) today announced full-year 2018 and fourth quarter 2018 operating and financial results.

The Company reported full-year 2018 net income of $988.3 million, or $2.64 per diluted share. The Company's net income includes certain items typically excluded by the investment community in published estimates, the result of which is referred to as "adjusted net income." Typically excluded items in aggregate represented $77.9 million, or $0.20 per diluted share. Adjusted net income for full-year 2018 was $1.07 billion, or $2.84 per diluted share (non-GAAP). Net cash provided by operating activities for full-year 2018 was $3.46 billion and EBITDAX was $3.62 billion (non-GAAP).

The Company reported net income of $197.7 million, or $0.53 per diluted share, for the quarter ended December 31, 2018. In fourth quarter 2018, typically excluded items in aggregate represented $3.9 million, or $0.01 per diluted share, of Continental's reported net income. Adjusted net income for fourth quarter 2018 was $201.7 million, or $0.54 per diluted share (non-GAAP). Net cash provided by operating activities for fourth quarter 2018 was $955.3 million (compares to my forecast of $851.6 million cash flow from operations) and EBITDAX was $850.6 million (non-GAAP).

Adjusted net income, adjusted net income per share, free cash flow, EBITDAX, net debt, net sales prices and cash general and administrative (G&A) expenses per barrel of oil equivalent (Boe) presented herein are non-GAAP financial measures. Definitions and explanations for how these measures relate to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures are provided at the conclusion of this press release. Also presented at the end of this press release is the Company's calculation of return on capital employed for 2018.

"2018 was a breakout year of performance for Continental with significant cash flow generation and debt reduction, as well as corporate returns that compare favorably against our peers and are competitive with other industries," said Harold Hamm, Chairman and Chief Executive Officer. "In 2019, we will continue to deliver strong corporate returns coupled with growth that can adjust to various market conditions."
Full-Year 2018 Results
$988 Million in Net Income in 2018, or $2.64 per Diluted Share
- $1.07 Billion Adjusted Net Income in 2018, or $2.84 per Diluted Share (Non-GAAP)
~ 14% Average Full-Year 2018 Return on Capital Employed (ROCE)
298,190 Boepd Average Daily FY 2018 Total Production, up 23% over FY 2017
- 168,177 Bopd Average Daily FY 2018 Oil Production; up 21% over FY 2017
$585 Million Total Debt Reduction and $239 Million Cash Build since Dec. 2017 Resulting in Net Debt (Non-GAAP) Reduction of $824 Million since Dec. 2017
- $5.77 Billion in Total Debt and $5.49 Billion in Net Debt as of Dec. 2018
$3.59 per Boe Production Expense; 36% Reduction in the Last Four Years
1.52 Billion Boe Year-End 2018 Proved Reserves, up 14% over Year-End 2017
- Year-End 2018 Oil Reserves up 18% over Year-End 2017
4Q18 Results
$198 Million in Net Income in 4Q18, or $0.53 per Diluted Share
- $202 Million Adjusted Net Income in 4Q18, or $0.54 per Diluted Share (Non-GAAP) < Compares to my forecast of $232.4 million or $0.62 per share.
324,001 Boepd Average Daily 4Q18 Production; up 9% over 3Q18
- 186,934 Bopd Average Daily 4Q18 Oil Production; up 14% over 3Q18
Bakken: 183,836 Boepd Average Daily 4Q18 Production; up 10% over 3Q18
- 2,800 Boepd Average 24-Hour IP per Well for 52 Gross Operated Wells in 4Q18
STACK: Another Over-Pressured Condensate Unit Outperforms Parent Type Curve
- 3,645 Boepd Average 24-Hour IP per Well for 19 Gross Operated Wells in 4Q18
SCOOP: SpringBoard on Pace to Add 10% to CLR Net Oil Production (3Q18-3Q19)

CLR's Five Year Vision Targets
~ 12.5% Annual Production CAGR
Average Annual Free Cash Flow (Non-GAAP) of $500 Million per Year at $60 per Barrel WTI
~ 14.5% Average Annual ROCE per Year at $60 per Barrel WTI
Dan Steffens
Energy Prospectus Group
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Continental Resources Q4 Results - Feb 18

Post by dan_s »

In the last 3 months, 24 ranked analysts set 12-month price targets for CLR. Their valuations range from $48.00 to $88.00. That is an unusually wide range of valuations for a company of this size, which provides accurate and detailed guidance.
The average price target among the analysts is $60.12.

NONE OF CLR'S OIL IS HEDGED. If you think oil prices are going higher, it is a "Screaming Buy" at today's share price.

I have updated my forecast/valuation model for CLR, but my valuation stays at $80.00/share, based on average realized oil prices of $52.25/bbl for 2019 and $58.00/bbl for 2020. My forecasts are based on the Company's guidance of 12.5% annual production growth for the next five year. That is impressive growth for a company of this size. CLR's production was up 23% year-over-year in 2018, so my guess is that they top their guidance again in 2019.

My updated forecast/valuation model for CLR will be posted to the EPG website later this evening.

CLR reports natural gas and NGLs on a combined basis, which is why their natural gas sold for an average price of $3.55/mcfe in 2018. My forecasts assume $3.50/mcfe for both 2019 and 2020. In the Oklahoma SCOOP and STACK plays they should be producing more liquids.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 945
Joined: Thu Nov 21, 2013 2:46 pm

Re: Continental Resources Q4 Results - Feb 18

Post by ChuckGeb »

7 cent miss on adjusted earnings and revenue miss vs consensus estimates doesn’t cause you any particular concern?

Could be a good day to buy tomorrow if stock gets slammed.
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Continental Resources Q4 Results - Feb 18

Post by dan_s »

The income miss was totally because of realized oil & gas prices during the quarter. CLR's production came in higher than my forecast and oil prices going forward now look to be higher than the oil prices used in my forecast. Plus, CLR production guidance of 12.5% per year for the next five years is very bullish.

Download the forecast model to Excel and look closely at row 48. Then compare it to their capex budget.
Last edited by dan_s on Tue Feb 19, 2019 11:55 am, edited 1 time in total.
Dan Steffens
Energy Prospectus Group
ChuckGeb
Posts: 945
Joined: Thu Nov 21, 2013 2:46 pm

Re: Continental Resources Q4 Results - Feb 18

Post by ChuckGeb »

I’m a buyer on the dip. This is a top pick imho.
dan_s
Posts: 34471
Joined: Fri Apr 23, 2010 8:22 am

Re: Continental Resources Q4 Results - Feb 18

Post by dan_s »

Because NONE OF THEIR OIL IS HEDGED, if you believe oil prices are going higher then CLR is a "Screaming Buy" at today's share price.

If WTI does go over $65/bbl soon, then my valuation of $80/share is too low.
Dan Steffens
Energy Prospectus Group
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