CLR is up big this morning, why?
TPH Morning Notes: CLR Shareholder Returns Focus
Positive to see dividend initiation, $1B share repurchase program
Sector: NAm E&P | Ticker: CLR | Recommendation: HOLD | Target: $49 | Close: $35.01
Positive announcement focusing on shareholder returns with the initiation of a quarterly dividend (20c/shr, annualized) and Board approval for a $1B share repurchase program beginning in Q2'19 and continuing through 2020. We see $5.5B of net debt / $264MM of cash as of Q1'19, with ~$1B of post-dividend FCF through 2020 (~$750MM Bal'19, ~$250MM 2020) at today's strip on our model. A substantial portion of the buyback (TPHe ~$300-500MM) is expected to be executed by YE'19 as management sees current value of the equity as unreasonably low making it the best use of excess FCF, with further upside to the program if growth is sacrificed in lieu of incremental FCF. It will be interesting to see how management prioritizes buybacks vs. paydown of debt, but expectations are for net debt to approach ~$5B by YE'19, en route to $4.2B or below LT. We would expect the dividend to be increased over time to a level more comparable to the S&P (CLR 0.6% vs. ~2.0%).
2019 guidance was reiterated, while the cumulative FCF for the 5-year vision at $60/bbl WTI has been increased +$1B to $5B on increased capital efficiencies and improved outlook for oil differentials.
First Call's Target Price for CLR is $58.95 this morning.
Continental Resources (CLR) Update - June 4
Continental Resources (CLR) Update - June 4
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Continental Resources (CLR) Update - June 4
From Stifel on 6-4-2019
by Derrick Whitfield
Continental Resources, Inc. (CLR, $35.01, Buy; Target $71.00)
Management initiates $1B repurchase program, sending a strong message to investors on its valuation and capital discipline
After the close on June 3, Continental announced the initiation of a quarterly dividend of $0.05/share and an initial $1 billion share-repurchase program. The record date for the first dividend is November 7, 2019 and it is payable November 21, 2019. The share repurchase program will begin in Q219 and will continue through year-end 2020. Based on current commodity prices, we expect ~$0.3-0.5B to be completed by year-end 2019. In addition to the dividend and share repurchase announcements, management reiterated its year-end 2019 net debt target of ~$5.0-5.3B, introduced a long-term net debt target of $4.2B or below, and increased its 5-year cumulative FCF estimate from $4.0B to $5.0B based on improvements in capital efficiencies and crude oil differentials. Net-net, we believe CLR's shareholder-friendly actions should alleviate M&A and capital discipline concerns.
by Derrick Whitfield
Continental Resources, Inc. (CLR, $35.01, Buy; Target $71.00)
Management initiates $1B repurchase program, sending a strong message to investors on its valuation and capital discipline
After the close on June 3, Continental announced the initiation of a quarterly dividend of $0.05/share and an initial $1 billion share-repurchase program. The record date for the first dividend is November 7, 2019 and it is payable November 21, 2019. The share repurchase program will begin in Q219 and will continue through year-end 2020. Based on current commodity prices, we expect ~$0.3-0.5B to be completed by year-end 2019. In addition to the dividend and share repurchase announcements, management reiterated its year-end 2019 net debt target of ~$5.0-5.3B, introduced a long-term net debt target of $4.2B or below, and increased its 5-year cumulative FCF estimate from $4.0B to $5.0B based on improvements in capital efficiencies and crude oil differentials. Net-net, we believe CLR's shareholder-friendly actions should alleviate M&A and capital discipline concerns.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group
Re: Continental Resources (CLR) Update - June 4
"Today marks another milestone in Continental's history as we initiate a total shareholder return strategy," said Harold Hamm, Chairman and Chief Executive Officer. "Our disciplined approach to balancing capital-efficient growth and reducing debt has enabled us to approve both an initial $0.20 per share annualized dividend and an initial $1 billion share-repurchase program. This demonstrates the confidence we have in the quality and sustainability of our assets and our commitment to maximizing shareholder value. We see the current value of our equity as being unreasonably low, making the acquisition of our stock the best use of excess cash at this time."
For over 50 years, Continental has grown organically through exploration and will continue to do so. Although there has been much market speculation, the Company's five year projection does not contemplate corporate M&A transactions. Continental remains keenly focused on capital efficiency and total shareholder returns.
The Company's total shareholder return strategy now includes:
Dividend: The Company's Board of Directors approved the initiation of a quarterly dividend of $0.05 per share on the Company's outstanding common stock, payable on November 21, 2019 to stockholders of record on November 7, 2019. This is equivalent to $0.20 per share, or approximately $75 million, on an annualized basis. All dividends beyond the November dividend are subject to Board approval. The Company expects to generate sufficient cash flow to increase the dividend over subsequent years should the Board elect to do so.
Share Repurchases: The Company's Board of Directors also authorized an initial share-repurchase program of up to $1 billion, beginning in second quarter 2019 and continuing through 2020, at times and levels deemed appropriate by Company management. The Company expects a substantial portion of this initial amount will be executed by year-end 2019. Should market conditions warrant, the Company could prioritize further share repurchases in lieu of production growth.
Debt Pay Down: Over the past 3 years, Continental has reduced net debt (non-GAAP) by approximately $1.7 billion. The Company plans to continue reducing net debt and expects to approach approximately $5 billion of net debt by year-end 2019. The Company plans to further reduce net debt to $4.2 billion or below longer term.
Five Year Vision: Over the next five years, the Company now expects to generate approximately $5 billion of free cash flow (non-GAAP) at $60 WTI, which is approximately $1 billion more than our previously disclosed projection. This increase is being driven primarily by improvement in capital efficiencies and crude oil differentials. This cash flow is expected to generate ample liquidity for further debt reduction, dividends, additional share repurchases or general corporate purposes. Additionally, annual return on capital employed (ROCE) is expected to improve throughout the five year period, averaging approximately 14.5%, assuming $60 WTI.
Under the stock repurchase program, the Company may repurchase shares from time to time at management's discretion in accordance with applicable securities laws, including through open market transactions, privately negotiated transactions or any combination thereof. In addition, shares may also be repurchased pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The amount and timing of repurchases are subject to a number of factors, including stock price, trading volume, general market conditions, legal requirements, general business conditions and corporate considerations determined by the Company's management, such as liquidity and capital needs. The stock repurchase program may be modified, suspended or terminated at any time by the Company's Board of Directors. The Company intends to fund repurchases under the program from existing cash or future cash flow.
For over 50 years, Continental has grown organically through exploration and will continue to do so. Although there has been much market speculation, the Company's five year projection does not contemplate corporate M&A transactions. Continental remains keenly focused on capital efficiency and total shareholder returns.
The Company's total shareholder return strategy now includes:
Dividend: The Company's Board of Directors approved the initiation of a quarterly dividend of $0.05 per share on the Company's outstanding common stock, payable on November 21, 2019 to stockholders of record on November 7, 2019. This is equivalent to $0.20 per share, or approximately $75 million, on an annualized basis. All dividends beyond the November dividend are subject to Board approval. The Company expects to generate sufficient cash flow to increase the dividend over subsequent years should the Board elect to do so.
Share Repurchases: The Company's Board of Directors also authorized an initial share-repurchase program of up to $1 billion, beginning in second quarter 2019 and continuing through 2020, at times and levels deemed appropriate by Company management. The Company expects a substantial portion of this initial amount will be executed by year-end 2019. Should market conditions warrant, the Company could prioritize further share repurchases in lieu of production growth.
Debt Pay Down: Over the past 3 years, Continental has reduced net debt (non-GAAP) by approximately $1.7 billion. The Company plans to continue reducing net debt and expects to approach approximately $5 billion of net debt by year-end 2019. The Company plans to further reduce net debt to $4.2 billion or below longer term.
Five Year Vision: Over the next five years, the Company now expects to generate approximately $5 billion of free cash flow (non-GAAP) at $60 WTI, which is approximately $1 billion more than our previously disclosed projection. This increase is being driven primarily by improvement in capital efficiencies and crude oil differentials. This cash flow is expected to generate ample liquidity for further debt reduction, dividends, additional share repurchases or general corporate purposes. Additionally, annual return on capital employed (ROCE) is expected to improve throughout the five year period, averaging approximately 14.5%, assuming $60 WTI.
Under the stock repurchase program, the Company may repurchase shares from time to time at management's discretion in accordance with applicable securities laws, including through open market transactions, privately negotiated transactions or any combination thereof. In addition, shares may also be repurchased pursuant to a trading plan meeting the requirements of Rule 10b5-1 under the Securities Exchange Act of 1934, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading laws. The amount and timing of repurchases are subject to a number of factors, including stock price, trading volume, general market conditions, legal requirements, general business conditions and corporate considerations determined by the Company's management, such as liquidity and capital needs. The stock repurchase program may be modified, suspended or terminated at any time by the Company's Board of Directors. The Company intends to fund repurchases under the program from existing cash or future cash flow.
Dan Steffens
Energy Prospectus Group
Energy Prospectus Group