Continental Resources (CLR) Update - Jan 28

[dan_s]

Update from Stifel

Continental Resources, Inc. (CLR, $52.16, Buy; Target $72.00)
Updating estimates after accretive PRB bolt-on - Derrick Whitfield
We are updating our model to reflect Continental's acquisition of Chesapeake Energy's (CHK, Not Covered) Powder River Basin assets for $450 million in cash. Chesapeake's assets include 172,000 net acres and 350 operated wells in southeastern Wyoming. While the acquired acreage is not contiguous to Continental's existing acreage position, we are positive on the transaction due to its attractive price (near PDP value), the scale it creates for Continental in the basin and, based on our estimates, is accretive to free cash flow (biases our 2022E and 2023E free cash flow estimates higher by $187mm and $162mm, respectively). The transaction is expected to close at the end of Q122. Of note, we estimate a discounted payback period of 3.5 years.

My current valuation of CLR is $70, based on much lower oil prices than the current NYMEX strip prices.

[Fraser921]

Dan,

Thanks for this. 187 fcf on 450m investment = 41 % roi . wow not too shabby

[dan_s]

Stifel:
"Valuation and recommendation: We reiterate our Buy rating and raise our 12-month target
price to $72.00/share ($70.00/share previously) due to operational and financial updates. Our
$72.00/share target price is based on a 20% discount to our NAV of $91.34/share." < NAV is a reasonable 12-month price target.

[dan_s]

TipRanks:
"On 1/26/2022 Truist Securities analyst Nela Dingmann raised the price target on Continental Resources (NYSE: CLR) to $80.00 (from $79.00) while maintaining a Buy rating."

[dan_s]

I have updated my forecast/valuation model for CLR, increasing my current valuation to $72.00.

Increased production after Q1 2022 to add more Powder River production from CHK. Interest expense does go up, but the acquisition is accretive to operating cash flow.