Continental Resources (CLR) Q1 Results - April 29

[dan_s]

CLR is currently trading at ~$29/share. My valuation is $48.00. My updated forecast/valuation model has been posted to the EPG website.

Continental Resources Delivers Outstanding 1Q21 Financial Results; Reinstates Dividend And Accelerates Shareholder Returns
OKLAHOMA CITY, April 28, 2021 /PRNewswire/ --

• Quarterly Dividend Doubled to $0.11 per Share
o Payable on May 24, 2021 to Stockholders of Record on May 10, 2021
• $260 Million Net Income & $0.72 Earnings per Share in 1Q21 < Compares to my forecast of $216.9 million net income, $0.59 per share.
• $3.1 Billion Projected Full-Year 2021 Cash Flow from Operations & $1.7 Billion
Projected Full-Year 2021 Free Cash Flow (Non-GAAP) at $60 WTI & $2.75 HH
• Accelerating Projected Debt Reduction to Below $4.0 Billion by Year-End 2021
• Projecting Approximately 12% Return on Capital Employed1 (ROCE) in 2021

Continental Resources, Inc. (NYSE: CLR) (the "Company") today announced its first quarter 2021 operating and financial results.

"Continental's outstanding first quarter results and accelerated shareholder returns, which includes our reinstated dividend and exceptional progress on debt reduction, underscore Continental's commitment to delivering strong cash flow generation, consistent asset performance and operational excellence," said Bill Berry, Chief Executive Officer.

The Company reported net income of $259.6 million, or $0.72 per diluted share, for the quarter ended March 31, 2021. In first quarter 2021, typically excluded items in aggregate represented $19.2 million, or $0.05 per diluted share, of Continental's reported net income. Adjusted net income for first quarter 2021 was $278.9 million, or $0.77 per diluted share (non-GAAP). Net cash provided by operating activities for first quarter 2021 was $1.04 billion and EBITDAX was $962.6 million (non-GAAP). < Compares to my Q1 forecast of $812.5 million operating cash flow per share.

Outstanding 1Q21 Financial Results; Reinstates Dividend & Accelerates Shareholder Returns

The Company's Board of Directors approved the reinstatement of the quarterly dividend at $0.11 per share on the Company's outstanding common stock, payable on May 24, 2021 to stockholders of record on May 10, 2021. This dividend is double the Company's previous quarterly dividend and underscores the Company's commitment to delivering strong shareholder capital returns.

The Company now projects to generate $3.1 billion of cash flow from operations and $1.7 billion of free cash flow (non-GAAP) for full-year 2021 at $60 per barrel WTI and $2.75 per Mcf Henry Hub. This is an approximately 30% increase to projected cash flow from operations versus original 2021 guidance.

Given the Company's significant annual cash flow generation, the Company is accelerating its debt reduction and projects debt below $4 billion by year end 2021. As previously announced, the Company has reduced its total debt to $4.97 billion, with a cash balance of $96 million, equating to net debt of $4.88 billion (non-GAAP) as of March 31, 2021.

The Company's second quarter 2021 to fourth quarter 2021 crude oil differentials guidance per barrel of oil is projected to average ($3.75) to ($4.75) and the Company's natural gas differentials guidance per Mcf is projected to average ($0.50) to $0.00.

Additionally, the Company is projecting an approximately 12% ROCE in 2021.
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Average Net Sales Price (non-GAAP)(1)

Per Barrel of Oil
$53.09

Per Mcf of Gas
$5.56 < CLR beat my forecast by a wide margin because they were able to sell a lot of ngas at HIGH spot market prices in February. CLR reports ngas and NGLs on a combined basis, which another reason their gas prices in future periods should be much higher in my forecast for future periods. NGL prices in Oklahoma remain much higher than they were in 2020.

Per Boe
$43.11

[dan_s]

From Truist Equity Research 4-29-2021

Continental Resources, Inc. (CLR)
1Q21 Beat; Higher Pricing Raises 2021 CFO/Debt Repayment
Guidance and Shareholder Returns
Continental reported higher than Truist Securities/Street estimated earnings/FCF driven
largely by strong pricing and somewhat working cap changes as production was recently
pre-released. Further the company doubled its dividend and laid out updated 2021 guidance
that confirmed the 30% higher CFO and $500mm less year-end debt that was suggested on
the pre-release, both driven by an $8/bbl increase in oil price among other things. CLR also
suggested improved oil and natural gas differentials for the remainder of the year though
kept total CAPEX/activity unchanged with 66% of forecasted 2021 spending to be in the
Bakken. The shares are likely to outperform tomorrow on the higher shareholder return,
1Q21 beat, and improved 2021 guidance.

Product Mix Shaping Up Well
While we continue to hear murmurs of concerns over CLR's oil mix, we believe prior changes
were largely asset timing driven with results as good as we and the company had expected.
Further, we forecast Continental to shift back to a heavier oil mix as oilier wells make up a
larger percent of completions for the remainder of the year with CLR taking advantage of
the improved oil pricing given no hedges. < The increasing gas-to-oil ratio was my only concern, but that's because winter drilling was focused on Central Oklahoma (SCOOP and STACK), which is more "gassy". More focus on the Bakken should increase oil production in 2H 2021.