TPH's take on CLR's new dividends + buyback plan
Posted: Thu Jun 06, 2019 8:45 am
Tudor Pickering Holt on June 6
CLR Stock Thoughts
Taking a more balanced approach to capital allocation, likely see moderation of growth to finance buyback at strip
Sector: NAm E&P | Ticker: CLR | Recommendation: HOLD | Target: $49 | Close: $38.49
Following Monday's announcement of the introduction of a dividend and $1B buyback, we've revised our outlook for growth to better balance FCF in order to finance the buyback close to strip pricing. We're maintaining our 2019 outlook, but for 2020 are essentially envisioning a flat y/y program at ~$2.6B (Street $3.0B) which would drive 9% oil growth (Street 14%). Management's 5-year vision plan underwrote a $60/bbl WTI environment, and we'd likely see a lower base level of activity if WTI were to be <$55/bbl with a move to ex-growth if WTI were to be ~$45/bbl. This plan would generate the FCF to fully execute on the remaining $500-700MM of buybacks by YE'20 (assuming $300-500MM of buybacks by YE'19, net debt at ~$5.2B). Big picture, the buyback and dividend make CLR more competitive with large-cap growth peers on shareholder returns and would look for greater clarity on strategy around balancing growth, debt reduction and shareholder returns at strip.
CLR Stock Thoughts
Taking a more balanced approach to capital allocation, likely see moderation of growth to finance buyback at strip
Sector: NAm E&P | Ticker: CLR | Recommendation: HOLD | Target: $49 | Close: $38.49
Following Monday's announcement of the introduction of a dividend and $1B buyback, we've revised our outlook for growth to better balance FCF in order to finance the buyback close to strip pricing. We're maintaining our 2019 outlook, but for 2020 are essentially envisioning a flat y/y program at ~$2.6B (Street $3.0B) which would drive 9% oil growth (Street 14%). Management's 5-year vision plan underwrote a $60/bbl WTI environment, and we'd likely see a lower base level of activity if WTI were to be <$55/bbl with a move to ex-growth if WTI were to be ~$45/bbl. This plan would generate the FCF to fully execute on the remaining $500-700MM of buybacks by YE'20 (assuming $300-500MM of buybacks by YE'19, net debt at ~$5.2B). Big picture, the buyback and dividend make CLR more competitive with large-cap growth peers on shareholder returns and would look for greater clarity on strategy around balancing growth, debt reduction and shareholder returns at strip.