Continental Resources (CLR) Update - Jan 30

[dan_s]

CLR gave an update on "Operation Springboard" yesterday.
> 335 horizontal wells
> laterals will average 9,800 ft.
> Cost per well is $9.5 to $10.0 million
> Estimated Ultimate Recovery is 1.3 million BOE per well or over 400 million BOE
> F & D cost under $10/boe
> IRR at 60% with oil at $50/bbl and 90% with oil at $60/bbl

Look at slides first here (dated 1/29/2019): http://investors.clr.com/phoenix.zhtml? ... rol-irhome

Then Read This: https://www.epmag.com/continental-resou ... iJ9#p=full

If you believe oil prices are going higher, CLR should be one of your Core Holdings. My valuation is $81/share based on average WTI oil price of $52.50/bbl in 2019.

[dan_s]

Seven analysts sent new reports/valuations to Reuters on CLR since the company's January 29th update on the "Springboard" drilling program.

Their valuations range from $48 to $64, with an average of $55.86/share.

NONE of CLR's oil is hedged, so I think most analysts "risk adjust" it because of the commodity price risk.

I am eager to see CLR's year-end reserve report, which should go a long way toward confirming the EUR's that they are telling the market.

[jmwSeattle]

Interesting how Zach’s which considers its own opinion as top notch has highly recommended selling CLR.

[dan_s]

My take on Zacks is that some of their analysis is based on short-term chart analysis and they don't look at the company's fundamentals. In the negative article that Zacks published a week ago they talk about CLR's debt level. IMO CLR's debt is easily supported by the company's massive proven reserves ($11.8 Billion PV10 value at 12-31-2017) and CLR's free cash flow from operations. CLR's 2P reserves are probably worth over $20 Billion.

Go to our website and take a hard look at row 47 on CLR's Net Income & Cash Flow spreadsheet (under the Sweet 16 tab). Come back and post here how much CLR's cash flow from operations exceeded their capex in 2018. Also, tell us how much CLR's production has increased year-over-year in 2018.

For all of you that are new here: On each forecast/valuation model there is a RED BOX that shows First Call's estimated operating cash flow per share for future periods. Take a hard look at what First Call's estimated cash flow per share is for CLR in 2019. CLR should be trading for at least 6X operating CFPS.

[jmwSeattle]

REV increased by 63%
Cashflow per share (before CapEx) increased by 61%
BOEPD increased by 21%
All three are forecasted to remain flat for 2019
I don’t know how to figure out how much they spent on CapEx. I do know that cash flow is a very important metric, or one of the most important. In ordinary stocks I want to see a lot of revenue growth or I’m not interested.

I don’t subscribe to Zach’s and I’m not usually an investor in individual stocks, but might listen to what Zach’s says about a particular stock in which I might take a position. Maybe they are geared to break out trades without so stating. I was interested to hear your take. I hear they’re chief researcher interviewed from time to time on a podcast I get. Usu. he gives his take on the market’s macro outlook.

I don’t know what FIRST CALL is and I don’t know how or where to access their reports. Since joining I’ve wondered about this. Glad you brought it up.

[dan_s]

First Call is a service provided by Reuters. First Call's forecasts for revenues, EPS, operating cash flow per share and their stock price targets are just an average of all the stock reports/forecasts that analysts have submitted to Reuters. Some of the reports included in the First Call averages are quite old, so I list some of the current ones on my forecast models.

Each Saturday I update the main Sweet 16 spreadsheet on our website and I show First Call's price target compared to my valuation for each stock.

For example:
For CLR there are currently 30 Wall Street Analysts' reports included in the Reuters/First Call consensus.
First Call's numbers are:
> Price Target = $63.31
> Price Targets submitted to Reuters range from $48 to $88. < Compares to my valuation of $81.00 for CLR.
> $4.90 Billion for 2019 Revenues (compares to ~$4.75 Billion in 2018)
> $2.55 EPS for 2019
> $9.54 operating cash flow per share for 2019 < IMO this is the most important statistic for an upstream oil & gas company. BTW CLR generates a lot of FREE CASH FLOW with oil over $50/bbl.

Take some time to look at one of the Sweet 16 forecast/valuation models housed on our website. They are valuable tools. You can find them under the Sweet 16 tab after you log on. They are only available to our members. On each model I show First Call's forecasts for price targets, revenues, EPS and operating CFPS.

NOTE: Wall Street Analyst are required to use their firm's commodity price deck when evaluating an upstream oil & gas company. This is why there are rather significant differences in the numbers submitted to Reuters.