Continental Resources (CLR) Update - Jan 6

[dan_s]

If you are bullish on the price of oil, then CLR should be one of your core holdings. NONE OF THE COMPANY'S OIL IS HEDGED.
This morning BofA analyst Doug Leggate upgraded Continental Resources to Buy from Neutral.

Continental Resources price target raised to $26 from $22 at Truist Financial
Truist analyst Neal Dingmann raised the firm's price target on Continental Resources to $26 from $22 and keeps a Buy rating on the shares. The company should report "notable" upcoming internal and external operations, the analyst tells investors in a research note, adding that Continental not only continues to be one of the most capital efficient and low-cost operators, but its management team has also done one of the best jobs in "properly reacting" to the market.

Here is their Outlook for 2021. Note that it is based on WTI averaging $45/bbl.

"As a continuation of Continental's historic track record of sustainable cash flow and debt reduction, we are projecting a 65% to 75% cash flow from operations reinvestment rate for 2021, with free cash flow projections of approximately $400 million at $40 WTI and $650 million at $45 WTI. Additionally, Continental is prioritizing debt paydown and expects to significantly reduce total debt to $5 billion or below by year end 2021, and down to $4 billion or below by year end 2022 or 2023," said Bill Berry, Chief Executive Officer.

In anticipation of stronger gas fundamentals in 2021, the Company shifted Oklahoma rigs to gassier areas in the second quarter 2020. To date, approximately 202 MMcfpd of the Company's 2021 natural gas is hedged, with two-thirds of the hedges representing collars with a weighted average floor price of $2.67 and a weighted average ceiling price of $3.44. The Company expects to continue an active and ongoing hedging program in 2021 and 2022. In Oklahoma, condensate wells are delivering strong early time results, with 20 recently completed SCOOP condensate wells performing in line with or better than expectations and are expected to deliver over 50% rates of return at $3.00 Henry Hub. With oil and gas inventory depth and direct access to multiple premium oil and gas markets in Oklahoma, the Company has the flexibility to capitalize on both oil and gas commodity prices.

The Company is projecting a 65% to 75% cash flow from operations (CFFO) reinvestment rate for 2021. At the midpoint of projected 2021 Capex, the Company is projecting annual cash flow from operations of $1.6 billion and annual free cash flow (FCF) of approximately $400 million at $40 WTI. The Company is projecting annual cash flow from operations of $1.85 billion and annual FCF of approximately $650 million at $45 WTI. The Company is projecting approximately 8.0% to 14.0% free cash flow yield at $40 to $45 WTI. Free cash flow yield is estimated by dividing the 2021 annual FCF estimate range by the Company's current market capitalization, as of November 5, 2020. Additionally, the Company is projecting total debt below $5.0 billion at year-end 2021 and $4.0 billion or below by year-end 2022 and 2023.

In 2021, the Company is projecting $1.2 to $1.3 billion of Capex at $40 to $45 WTI and $3 Henry Hub. The Company is projecting a low single digit production growth year-over-year in 2021 and expects a cash flow breakeven price of $32 WTI in 2021.

The Company will provide its full 2021 guidance, capital expenditures budget and operating details during its historical timeframe of early next year. The Company's full 2020 guidance, capital expenditures budget and operating details can be found at the conclusion of this press release.