Continental Resources (CLR) Q4 Results

[dan_s]

OKLAHOMA CITY, Feb. 21, 2018 /PRNewswire/ -- Continental Resources, Inc. (NYSE: CLR) (the Company) today announced fourth quarter and full-year 2017 operating and financial results.

Continental reported net income of $841.9 million, or $2.25 per diluted share, for the quarter ended December 31, 2017. Of total net income, $128.2 million was from operations and $713.7 million was from federal tax reform. The Company reported full-year net income of $789.4 million, or $2.11 per diluted share, with $75.7 million from operations and $713.7 million from federal tax reform.

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." In fourth quarter 2017, these typically excluded items in aggregate represented $688.2 million, or $1.84 per diluted share, of Continental's reported net income. Adjusted net income for the fourth quarter was $153.7 million, or $0.41 per diluted share. < This compares to my forecast of $0.39 EPS for Q4

For full-year 2017, these typically excluded items in aggregate represented $598.6 million, or $1.60 per diluted share. Adjusted net income for full-year 2017 was $190.8 million, or $0.51 per diluted share.

Net cash provided by operating activities for fourth quarter 2017 was $731.1 million, and for full-year 2017 it was $2.1 billion. < My Q4 estimate was $681.4 million cash flow from operations.

EBITDAX for fourth quarter 2017 was $837.9 million, contributing to full-year 2017 EBITDAX of $2.4 billion. Definitions and reconciliations of adjusted net income (loss), adjusted net income (loss) per share and EBITDAX to the most directly comparable U.S. generally accepted accounting principles (GAAP) financial measures can be found in the supporting tables at the conclusion of this press release.

"Continental's fourth quarter performance was a fitting completion to a standout year," said Harold Hamm, Chairman and Chief Executive Officer. "As we made clear in our 2018 guidance announcement, we expect even stronger performance in 2018 with both significant production growth and robust free cash flow."

[dan_s]

The only negative thing in their Q4 results that explains the dip in share price today is the $59.6 million litigation settlement expense. They don't mention it in the press release.

Higher NGL prices really helped in Q4. CLR reports natural gas and NGLs on a combined basis, so the realized price per mcf is quite high because of the big jump in NGL prices. Including the cash settlement on their natural gas hedges, CLR's realized price was $3.70/mcf.

[dan_s]

In the last 3 months, 16 ranked analysts set 12-month price targets for CLR. The average price target among the analysts is $64.19. Price targets range from $55 to $78.

CLR is trading at $49.33 today.

Keep in mind that many of the Wall Street firms that have submitted forecasts and price targets to First Call are still using much lower oil, gas and ngl prices than we have today. Only recently, have some forecasts that I've seen started using $60 WTI.

I have updated my forecast/valuation model for CLR with Q4 actuals and the company's guidance for 2018. My valuation increases by $3 to $78.00/share.

1. CLR increased production by 11.7% YOY in 2017 and their guidance is for ~20% YOY growth in 2018.
2. Revenues are heavily weighted to liquids and none of their liquids are hedged. Just keep this risk in mind.
3. The balance sheet is in good shape.
4. They should generate $700 to $900 million of free cash flow from operations this year. < Wall Street says this is what they want to see, so where are the buyers today?