Continental Resources (CLR) Q4 Results - Feb 14

[dan_s]

An outstanding quarter that beat my forecast.
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The Company reported net income of $742.7 million, or $2.04 per diluted share, for the quarter ended December 31, 2021. In fourth quarter 2021, typically excluded items in aggregate represented ($91.6) million, or ($0.25) per diluted share, of Continental's reported net income. Adjusted net income for fourth quarter 2021 was $651.0 million, or $1.79 per diluted share (non-GAAP). < Adjusted Net Income compares to my forecast $587.7 million ($1.61/share).

Net cash provided by operating activities for fourth quarter 2021 was $1.25 billion and EBITDAX was $1.39 billion (non-GAAP). < Very close to my operating cash flow forecast of $1,284.8 million.

Fourth quarter 2021 oil production averaged 166.7 MBopd. < Compares to my forecast of 165 MBopd.
Fourth quarter 2021 natural gas production averaged 1,041 MMcfpd. < Compares to my forecast of 1,080 MMcfpd. Note that CLR reports natural gas and NGLs on a combined basis, which is why their realized price is so high for natural gas.

My current valuation of CLR will probably go to $76/share, but I need to see their 10K before I can update my forecast/valuation model.

[Fraser921]

Buying back stock on a consistent basis

October 1, 2021 to October 31, 2021
Repurchases for tax withholdings (2) 11,288 $ 52.13 — $ —
November 1, 2021 to November 30, 2021
Repurchases for tax withholdings (2) 41,154 $ 49.36 — $ —
Share repurchase program (1) 1,102,682 $ 46.30 1,102,682 $ 566.5
Purchases by principal shareholder (3) 108,500 $ 47.69 — $ —
December 1, 2021 to December 31, 2021
Share repurchase program (1) 179,820 $ 42.33 179,820 $ 558.9
Purchases by principal shareholder (3) 367,020 $ 43.82 — $ —
Total for the quarter 1,810,464 $ 45.59 1,282,502

[Fraser921]

They filed their 10-k (annual report)

one negative (but a good problem to have)

Cash Payments for Income Taxes
As of February 10, 2022, the publicly available forward commodity strip prices for the remainder of 2022 averaged $83.38 per barrel for crude oil and $4.09 per Mcf for natural gas. If commodity prices remain at these levels for the year, we could potentially utilize the full amount of our federal net operating loss carryforwards and certain state net operating loss carryforwards and generate significant taxable income in 2022, which could result in us making cash payments for income taxes in the upcoming year. Because of the significant uncertainty inherent in numerous factors utilized in projecting taxable income, including future commodity prices, production levels, development activities, capital spending, profitability, and general economic conditions, we cannot predict the amount of future income tax payments with certainty, but such payments could be significant.

[Fraser921]

Odds & Ends

I don't see any oil hedges but they put on some more gas hedges: (The best was a 4.50 floor and a 6.00 cap)

April 2022 - September 2022
Swaps - Henry Hub 200,000 MMBtus/day $ 4.03
April 2022 - September 2022

Collars - Henry Hub 110,000 MMBtus/day $ 4.50 $ 6.00
July 2022 - December 2022
Swaps - WAHA 45,000 MMBtus/day $ 3.41
October 2022 - March 2023
Collars - Henry Hub 210,000 MMBtus/day $ 4.12 $ 5.52
January 2023 - December 2023
Swaps - WAHA 40,000 MMBtus/day $ 2.69
April 2023 - September 2023
Swaps - Henry Hub 100,000 MMBtus/day $ 3.25
October 2023 - March 2024
Collars - Henry Hub 100,000 MMBtus/day $ 3.14 $ 4.00
April 2024 - December 2024
Swaps - Henry Hub 100,000 MMBtus/day $ 3.11

[Fraser921]

Cash Flow (Revolver)

they owed 500 m at Year end

This note was on slide 14 of their slide deck

6.8 B Net Debt(1)at 12/31/21 •$240 MM Revolver as of 1/31/22 ($260 MM Reduction Since YE21) = 8.4 m per day

They are doing even better with the higher prices in Feb

[Fraser921]

and what do you get for fantastic results

Down 11 %

They announce 1 b buyback. They only have 60 m shares available as float 20m * 50= 1 billion

So they announce they will be buying back 1/3rd the float.

If the market is doing this to someone earning 90 on oil, what will they do to someone with crap hedges?

I'm buying more on this ridiculous move, just got filled at 51.06 lolol

Only negatives today

No Russian invasion , oil down a few bucks> Putin a genius, scares the world and drives oil up.
CLR might have to pay taxes this year. I need to figure this out. I'm sure thats not in any of the models
Dan, does taxes impact modeling

[dan_s]

Stifel's take

Continental Resources, Inc. (CLR, $57.36, Buy; Target $72.00)
Noisy 2022 guidance, but multi-year plan is encouraging - Derrick Whitfield
We view this release as neutral. The positives include: i) an EBITDAX beat (1.4% above consensus), ii) introduction of a 2.0% or greater dividend yield long-term target, iii) a $500mm increase to the company's buyback program, iv) a 2022-2025 FCF outlook that targets at least $11.6B of cumulative FCF (44% of its EV) at $80/bbl. The negatives include: i) lower than expected Q421 oil volumes (0.8% below consensus) on higher than expected capex (1.0% above consensus), and ii) lower than expected 2022 total/oil production guidance (3.3%/2.7% below consensus) on higher than expected capex (7.6% above consensus). While the return of capital program was less prescriptive than some might have envisioned, 2022 guidance was expected to be a negative event based on management messaging and M&A disclosures. Looking through the noise, we view CLR as an underappreciated stock that is rapidly deleveraging and offering a substantial return of capital proposition.