Energy Prospectus

From Stifel

Continental Resources, Inc. (CLR, $52.00, Buy; Target $66.00)
Announces preliminary Q321 results and a continued focus on natural gas development - Derrick Whitfield

After the close, Continental announced preliminary Q321 operating results. Specifically, the company delivered total and oil production volumes of 331.4 mboepd (0.2% above consensus) and 157.2 mbopd (5.8% below consensus), respectively, and reported non-acquisition capex of $384mm (2.2% below consensus). Of importance, the company noted that Q321 oil volumes were negatively impacted due to management's decision to focus on natural gas development in Oklahoma (80 mmcfpd increase in natural gas volumes, 4 mbopd reduction in oil production versus prior projections) as well as voluntarily curtailments of 3 mbopd due to unplanned midstream outages in the Bakken. In addition, management highlighted a company-record $669mm of FCF generated during the quarter. In our view, the sustained focus on gas is prudent given the strong pricing backdrop and highlights Continental's ability to flex its portfolio to capture favorable market conditions. Based on our analysis, the gas tilt is modestly FCF positive for 2022.
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Since I will be giving more weight to my 2022 operating cash flow forecast, my valuation of CLR will be going up quite a bit after they release Q3 results. The spike in free cash flow (FCF) is definitely a positive.

My updated forecast/valuation model for CLR will be posted to the EPG website by 5PM today.

OKLAHOMA CITY, Oct. 26, 2021 /PRNewswire/ -- Continental Resources, Inc. (NYSE: CLR) (the "Company") today announced its third quarter 2021 production results and record free cash flow (non-GAAP) and rescheduled its third quarter 2021 earnings release and conference call.

Third quarter 2021 total production averaged approximately 331.4 MBoepd. Third quarter 2021 oil production averaged approximately 157.2 MBopd. Third quarter 2021 natural gas production averaged approximately 1,046 MMcfpd.

The Company generated approximately $1.02 billion of cash flow from operations and a Company record $669 million of free cash flow (non-GAAP) for the third quarter 2021. Non-acquisition capital expenditures attributable to the Company for third quarter 2021 totaled approximately $384 million. The Company has reduced its total debt to $4.74 billion and with a cash balance of $694 million, this equates to net debt (non-GAAP) of $4.05 billion as of September 30, 2021.

"We have elected to continue focusing on natural gas development in Oklahoma based on favorable market conditions. This resulted in an approximate 80 MMcfpd increase in natural gas and 4 MBopd reduction in oil to third quarter 2021 production results in Oklahoma vs. prior projections. Additionally, in support of our industry-leading ESG gas capture stewardship in the Bakken, we voluntarily curtailed an incremental 3 MBopd in third quarter 2021 during unplanned midstream outages," said Bill Berry, Chief Executive Officer.

The Company is rescheduling its third quarter 2021 earnings release and conference call. The Company plans to announce third quarter 2021 results on Wednesday, November 3, 2021 after the close of trading on the New York Stock Exchange. The Company also plans to host a conference call to discuss third quarter 2021 results on Thursday, November 4, 2021 at 11:00 a.m. ET (10:00 a.m. CT). Those wishing to listen to the conference call may do so via the Company's website at www.CLR.com or by phone:

Time and date:

11:00 a.m. ET, Thursday, November 4, 2021

Dial-in:

1-888-317-6003

Intl. dial-in:

1-412-317-6061

Conference ID:

8481323

A replay of the call will be available for 14 days on the Company's website or by dialing:

Replay number:

1-877-344-7529

Intl. replay:

1-412-317-0088

Conference ID:

10160546

The Company plans to publish a third quarter 2021 summary presentation to its website at www.CLR.com prior to the start of its conference call on Thursday, November 4, 2021.

What other analysts think after updating their models for the Q3 update from CLR.

> Gabriele Sorbara at Siebert Williams Shank & Co rates CLR a Buy on 10/27/21 with a price target of $69.00
> John Freeman at Raymond James rates CLR a Buy on 10/26/21 with a price target of $60.00
> Vincent Lovaglio at Mizuho Securities rates CLR a Hold on 10/26/21 with a price target of $62.00

At the time of this post, CLR was trading at $48.85.

My current valuation increases by $5.50 to $67.00.

Your model (excel sheet) was right on the mark.

The mix was slightly more gas and 1 % less in total but your FCF estimate was 1,029 k vs their rounded 1.02 b which suggests a higher realized price.