Continental Resources (CLR) Update - Nov 4

[dan_s]

Stifel's take:
Continental Resources, Inc. (CLR, $46.93, Buy; Target $66.00)
Expect stock to strengthen throughout trading day as investors fully evaluate the Delaware acquisition and capex increase - Derrick Whitfield
We view this release as slightly negative. The positives include: i) an adjusted EBITDA beat (1.9% above) driven by stronger than expected realizations, ii) a 33% increase to the base dividend (1.6% annualized yield), and iii) strong well results in Oklahoma. The negatives include: i) a 10.7% increase to 2021 capex (including Delaware capex) while reiterating 2021 production guidance (excluding Delaware production), and ii) the acquisition of Pioneer's Delaware position through an all-cash transaction valued at $3.25B. While the acquisition will be accretive to our target price and multiples assessment, we expect the gut investor reaction to be negative due to asset quality/depth concerns. We disagree with this assertion based on our assessment of CLR's legacy assets.
Net-net, the investment proposition for CLR remains strong as a FCF generating machine (~20% legacy FCF yield on 2022 and trending higher) that is nearing an inflection in return of capital messaging.

I just got back from Dallas. I will update my forecast/valuation model for CLR on Friday morning.