CLR Q3 Results

[dan_s]

Continental Resources, Inc. (CLR, $13.30, Buy; Target $22.00)
- Delivers a strong quarter and strategically pivots to natural gas in the near-term - Derrick Whitfield, Stifel

We view this release as positive. The positives include: i) a total equivalent and oil production beat (2.5% and 6.9% above consensus, respectively) on lower than expected capex (7.0% below), ii) a production-driven adjusted EBITDAX beat (25.2% above consensus), iii) a 2021 outlook that is in-line with consensus expectations and delivers meaningful FCF to pay down debt at various price scenarios. The negatives include: i) a higher than expected 2H20 capex (6.7% above consensus) but in-line with guidance and ii) a gassier than expected production profile for 2021. In our view, Continental is utilizing the optionality in its Oklahoma asset base to lock-in returns and free cash flow in an increasingly constructive gas environment. Net-net, while potentially unpopular due to modest negative oil revisions, we believe this decision is prudent in light of the broader macro environment as it provides a degree of certainty in the return of capital