CLR and PXP Upgrades

[dan_s]

Comments below from Global Hunter:

Continental Resources, Inc. (NYSE: CLR; $56.15; Buy; $78.00 PT) 2Q production, my friend, is flowin' in the wind.

We are upgrading to a Buy rating from Accumulate while maintaining a $78 price target based on 13.0x and 9.7x our 2011 and 2012 EBITDA estimates, respectively. Despite a less than stellar quarter, CLR remains the most efficient operator in the Bakken by a large margin. For 2Q, CLR missed our production, earnings and EBITDA but exited July at 62,000 boepd. We were forecasting 58,710 boepd for 3Q. We had 33% growth modeled on lower productivity wells versus previous guidance of 35%-37%. Our numbers have moved up to 37% with better wells going along with corporate guidance of 36%-39%. We were looking for 414 MMboe of proved mid-year reserves and management posted 421 MMboe. Bakken EURs were 518 Mboe (514 Mboe GHS) and they jacked them up to 603 Mboe based on historic performance and 24 frac stages. Now CLR is going to 30 frac stages so expectations are for EURs to continue to climb. Just maintaining our 4Q11 production run rate would equate to 20% YOY growth in 2012 but with another $2B budget, growth could be as impressive next year as this year.


Plains Exploration & Production Co. (NYSE: PXP; $34.77; Buy; $54.00 PT) Fasten your seat belts - this Plains now leaving the offshore.

Plains Exploration & Production (PXP) reported solid 2Q11 results that should become the standard going forward as the company shifts its capex resources to focus solely on onshore oil opportunities. California production is in the spotlight with higher volumes and higher realized prices. PXP's entrance into the Eagle Ford now looks like a significant positive, with recent acreage transactions more than double what they paid. Upcoming deepwater spinoff/funding should be a fall catalyst and complete the transition to solely onshore operational focus. With all assets running virtually seamlessly, we are raising our rating from Accumulate to Buy while raising our price target from $40.00 to $54.00 reflecting 6.5x our 2012 EBITDA estimate.

Philip McPherson (949) 274-8056 pmcpherson@ghsecurities.com

Report Link: 2011-8-05 PXP Company Update

[dan_s]

New crude oil sales contracts will increase PXP's realized oil price going forward. - Dan

In August, PXP executed a new marketing contract for its California crude production with ConocoPhillips (NYSE:COP - News). Currently PXP sells approximately 65% of its California crude oil to ConocoPhillips. The new contract covers approximately 90% of PXP's California production, extends the dedication from January 1, 2015 to January 1, 2023 and replaces the percent of NYMEX index pricing mechanism with a market-based pricing approach beginning in 2012.

Separately, PXP executed an agreement with a third party purchaser to sell a large portion of its Eagle Ford crude oil using a Light Louisiana Sweet (LLS) based pricing mechanism. < LLS sells for ~$20/bbl premium to WTI

In 2012, using the current market price outlook and the new marketing contracts, PXP currently expects full-year oil price realization to be between 101% - 103% of NYMEX. PXP expects 2012 total company liquids price realization, which includes crude oil and natural gas liquids, to be between 93% - 95% of NYMEX compared to full-year 2011 total company liquids price realization guidance range of 84% - 86%.