Continental Resources (CLR) - Update
Posted: Fri Apr 27, 2018 8:51 am
Comments below from TPH:
"Company announced yesterday the execution of a 400MMcf/day firm transportation (FT) agreement with ENBL on the ‘Project Wildcat' pipeline from the SCOOP/STACK to markets in DFW, TX. With the company back in growth mode, it's good to see mgmt. stay on top of marketing in an active, growing basin with ample associated gas production, especially in the context of infrastructure constraints occurring throughout the US. North Texas end-point likely means this pipe isn't tied to the anticipated LNG-linked gassy JV that mgmt. has hinted towards, for which we remain watchful. While CLR represents a liquid way to gain oil exposure outside of the Permian, relative performance (+24% YTD vs. +8% E&Ps) may mean this is baked in, leaving us sidelined for now on valuation."
NONE of CLR's oil is hedged because Harold is convinced oil prices are going higher. Based on my forecast/valuation model that assumes $60/bbl for all future periods, CLR will generate $3.2 Billion cash flow from operations, which compares to the capital program for 2018 of $2.3 Billion. With $900 million of FREE CASH FLOW, CLR deserves to be trading at a much higher multiple. My valuation today is $78.00/share.
"Company announced yesterday the execution of a 400MMcf/day firm transportation (FT) agreement with ENBL on the ‘Project Wildcat' pipeline from the SCOOP/STACK to markets in DFW, TX. With the company back in growth mode, it's good to see mgmt. stay on top of marketing in an active, growing basin with ample associated gas production, especially in the context of infrastructure constraints occurring throughout the US. North Texas end-point likely means this pipe isn't tied to the anticipated LNG-linked gassy JV that mgmt. has hinted towards, for which we remain watchful. While CLR represents a liquid way to gain oil exposure outside of the Permian, relative performance (+24% YTD vs. +8% E&Ps) may mean this is baked in, leaving us sidelined for now on valuation."
NONE of CLR's oil is hedged because Harold is convinced oil prices are going higher. Based on my forecast/valuation model that assumes $60/bbl for all future periods, CLR will generate $3.2 Billion cash flow from operations, which compares to the capital program for 2018 of $2.3 Billion. With $900 million of FREE CASH FLOW, CLR deserves to be trading at a much higher multiple. My valuation today is $78.00/share.