Energy Prospectus

CLR reported Q2 financial results after the markets closed today.

Strong 2Q22 Results
• $1.74 B Cash Flow from Operations (CFO) & $1.23 B Free Cash Flow (FCF) (Non-GAAP)
• $1.21 B Net Income; $3.35 per Diluted Share ($1.25 B Adj. Net Income; $3.47 per Adj. Share (Non-GAAP)) < Adjusted Net Income compares to my forecast of $1,177.6 million ($3.24 per share).
• $265.2 MM Total Debt Reduction and $814.2 MM Net Debt (Non-GAAP) Reduction in 2Q22

Declaring $0.28 per Share Quarterly Dividend (Payable 8/22/22 to Stockholders of Record on 8/8/22)

Updating Various 2022 Guidance Metrics & Differentials
• Increasing Projected Return on Capital Employed (ROCE) to ~32% from Previous ~31%
• Improving 2022 Crude Oil Differentials per Barrel of Oil to Average ($2.25) to ($3.25) from ($2.50) to ($3.50)
• Improving 2022 DD&A per Boe to $12.00 to $14.00 from $14.00 to $16.00
• Updating 2022 Production Expense per Boe to $3.75 to $4.25 from $3.50 to $4.00

Continental Resources, Inc. (NYSE: CLR) (the "Company") today announced its second quarter 2022 operating and financial results, declared a quarterly dividend, and updated various 2022 guidance metrics and differentials.

The Company reported net income of $1.21 billion, or $3.35 per diluted share, for the quarter ended June 30, 2022. In second quarter 2022, typically excluded items in aggregate represented $42.8 million, or $0.12 per diluted share, of Continental's reported net income. Adjusted net income for second quarter 2022 was $1.25 billion, or $3.47 per diluted share (non-GAAP). Net cash provided by operating activities for second quarter 2022 was $1.74 billion, and EBITDAX was $2.20 billion (non-GAAP).

Second quarter 2022 total production averaged 400.2 MBoepd. < Beats my forecast of 385,000 Boepd.
Second quarter 2022 oil production averaged 198.3 MBopd. < My forecast was 200,000 bopd.
Second quarter 2022 natural gas production averaged 1,211 MMcfpd. < My forecast was 1,110 MMcfpd.

Realized oil and gas price came in higher than my forecast.

IMO what this means is that the worst case is that the BOD is forced to accept Harold's $70/share bid.

As previously announced on June 14, 2022, the Company received a non-binding proposal from Harold G. Hamm, on behalf of himself, the Harold G. Hamm Trust and certain trusts established for the benefit of Mr. Hamm's family members (collectively, the "Hamm Family"), to acquire for cash all of the outstanding shares of common stock (the "Common Stock") of the Company, other than shares of Common Stock owned by the Hamm Family and shares of Common Stock underlying unvested equity awards issued under the Company's long-term incentive plans, at a price of $70.00 per share. The Company's board of directors has formed a special committee of independent directors (the "Special Committee") to evaluate and consider the Hamm Family's proposal. The Special Committee has hired independent legal and financial advisors, and the Special Committee's evaluation is ongoing.

The Company cautions its shareholders and others considering trading in its securities that the Hamm Family's proposal constitutes only an indication of interest and does not constitute a binding commitment with respect to a proposed transaction. Moreover, no assurance can be given that such proposal will result in a transaction occurring or its timing or ultimate terms.

Quick Take: My valuation of CLR will be at least $90/share.

I need to review the 10Q before I can finalize my valuation.

I really don't see how the BOD's advisors can recommend anything but to set up a dataroom and invite others to make a competing bid for the entire company. Selling the company to Harold at $70/share would be at a price of less than 4X operating cash flow, which is VERY CHEAP for a company of this size and quality.

July 28 (Reuters) - U.S. shale producer Continental Resources Inc beat second-quarter profit expectations on Thursday, on the back of higher oil prices.

Continental also said it was still evaluating a take-private offer in June from billionaire-founder Harold Hamm's family trust, which valued the company at over $25 billion.

The proposal and the quarterly profit jump both come at a time of soaring energy prices on tight supply as demand rose to pre-pandemic levels and as Western countries imposed sanctions on Russia following its invasion of Ukraine.

Analysts also see the take-private attempt as an indication of Hamm's clear frustration at how public producers are expected to forego raising crude output in favor of higher shareholder payouts, even as oil prices have risen beyond $100 a barrel.

Continental had said at the time it formed a special committee of independent directors and hired advisors to consider Hamm's proposal.

U.S. crude has gained 40.6% since the start of 2022 and 5.5% through the June quarter.

Continental said its average adjusted sales price nearly doubled to $76.02 per barrel of oil equivalent (boe) from $39.99 boe a year earlier.

The Oklahoma City-based firm said its total average production in the reported quarter was 400,168 boe per day, up 18% from a year earlier.

The company, however, raised its 2022 production expense per boe forecast to $3.75-$4.25 from $3.50-$4.00, citing increased oil well intervention activity and inflationary pressure.

Net income attributable to the company more than quadrupled to $1.21 billion, or $3.35 per share, in the quarter ended June 30, compared with year-ago profit of $289.33 million, or 79 cents per share.

Excluding items, the company earned $3.47 a share, above Wall Street consensus of $3.18 per share. (Reporting by Ruhi Soni in Bengaluru; Editing by Krishna Chandra Eluri)