Continental Resources (CLR) Q2 Results - Aug 4

[dan_s]

Continental Resources Announces Second Quarter 2020 Results And Updates Guidance

The Company reported a net loss of $239.3 million, or $0.66 per diluted share, for the quarter ended June 30, 2020. In second quarter 2020, typically excluded items in aggregate represented a decrease of $16.4 million, or $0.05 per diluted share, in Continental's reported net loss. Adjusted net loss for second quarter 2020 was $255.7 million, or $0.71 per diluted share (non-GAAP). < Compares to my forecast of a net loss of $191.4 million.

"Continental has proactively responded to the unprecedented events that have shaped the global commodity landscape in 2020. By deferring volumes in the second quarter of 2020, we expect to generate an estimated $90 million in incremental cash flow from operations at $40 WTI. Combined with our strong asset position and unmatched shareholder alignment, we believe Continental's equity reflects an uncommon value," said Bill Berry, Chief Executive Officer.

Production Update

Second quarter 2020 total production averaged 202,815 Boepd. < Compares to my forecast of 200,000 Boepd.
Second quarter 2020 oil production averaged 95,174 Bopd. < Compares to my forecast of 110,000 BOPD.
Second quarter 2020 natural gas production averaged 645.8 MMcfpd.
During the second quarter, approximately 55% of the Company's operated oil volumes were shut in, or approximately 7.8 MMBo.

Curtailed Operated Oil Volumes in 2Q20 Estimated to Generate $90 Million in Incremental Cash Flow from Operations at $40 WTI
• Approximately 55% of Oil Volumes (7.8 MMBo) Curtailed in 2Q20
• 202,815 Boepd Average Daily 2Q20 Production

2020 Full-Year Average Production of 155,000 to 165,000 Bopd & 800,000 to 820,000 Mcfpd
• 3Q20 Average Production of 280,000 to 300,000 Boepd
• 2020 Exit Rate Production of 310,000 to 330,000 Boepd

Forecasting Approx. $1.3 Billion Annual Cash Flow from Operations and $200 Million Annual Free Cash Flow (FCF) (Non-GAAP) in 2020 at $40 WTI
• $615 Million Cash Flow from Operations and $500 Million FCF in 2H20

Targeting Total Debt of $5.4 Billion to $5.5 Billion by YE20

Low Cost Industry Leadership: Reinstating Original per Unit Cost Guidance
• $3.58 Production Expense per Boe in 2Q20; in Line with Original Guidance even with Production Curtailments

On Track for Previously Revised $1.2 Billion or Lower Capital Spend in 2020
• Est. $1.2 Billion D&C Maintenance Capital to Hold Production Flat YoY in 2021

Operating Efficiencies Continue to Drive Year-Over-Year All-In Well Costs Lower
• Bakken Completed Well Cost Decreased 12% to $7.2 Million per Well (Approx. 70% Structural)
• South Completed Well Cost Decreased 10% to $9.5 Million per Well (Approx. 80% Structural)

[dan_s]

Stifel's take on q2 results

Continental Resources, Inc. (CLR, $17.64, Buy; Target $23.00) < Same as my valuation.
Announces capital efficient outlook and improving well costs - Derrick Whitfield

We view this release as slightly positive. The positives include: i) encouraging 2020 production guidance (5% above on oil), ii) strong 2H20 free cash flow outlook at $40/bbl and targeted debt reduction, iii) CWC improvements of 10%-12% primarily due to operational efficiencies (70%-80%), and iv) an updated 2021 maintenance capital scenario. The only negative was lower than expected quarterly production. Net-net, Continental provided a capital efficient outlook and reiterated its focus on deleveraging its balance sheet. In our view, those developments will far outweigh lower than expected quarterly production due to curtailments.

CLR intentionally lowered oil production in order to keep the reserves in the ground to sell the oil in 2H 2020 at a much higher oil price. The strategy worked.