Continental Resources: A Smart Bet for Rising Oil

Continental Resources, Inc. (CLR) announced second quarter revenues of $451.2 million, down 43% from $796.4 million during the same period last year.

It also declared a second quarter net loss of $119.4 million or $0.32 of loss per diluted share compared to a net income of $0.40 million in second quarter of 2015.

The upstream energy production company reported continued year-over-year decline in both its top and bottom lines primarily due to the ongoing weaker global commodity demand and pricing environment coupled with the expanding exploration expenditures, continuing to put downward pressure on the company’s margins despite significant cost-optimization initiatives.
Favorable financial position

Continental Resources is focused on increasing overall liquidity while minimizing net debt through cost-optimization efforts being undertaken all through its key operations.
Continental now has significant liquidity with about $2.75 billion of revolving credit facility that can be grown to $4.0 billion.

Moreover, the company has no short-term debt maturities, with its earliest debt maturity due in November 2018 ($500 million at an average 4.3% interest rate).

Continental also has impressively maintained an industry-leading low cost position amid tough global operating environment.
Continental Resources: A Smart Bet for Rising Oil
Image by / c2.staticflickr.com
This positioning should provide sustainable long-term growth.

Costs continue to fall nearly every quarter. Consolidated cash G&A and production expenditures have fallen 36% from fiscal year 2014 till the first half of 2016. Going forward, Continental Resources targets 133% growth in capital efficiency measured in barrel of oil per dollar invested.

Focus on the right areas

Moving ahead, Continental Resources has attractively updated the complete fiscal year 2016 production and expenditure guidance owing to robust outperformance. Production guidance for complete fiscal year 2016 increased to the range of 210,000 to 220,000 boe per day, from the range of 195,000 to 205,000 boe per day.

Continental Resources has strategically planned and declared its third straight sale of non-core assets for this year in the non-core properties of Montana and North Dakota for total proceeds of $222 million. This strategic sale comprises of 68,000 total acres of planned leasehold mainly in North Dakota, Williams County, and about 12,000 total acres of non-core leasehold across Roosevelt County in Montana.

Total non-core asset sales have been worth over $600 million.

Thesis: Fundamental metrics continue to improve

Continental continues to have significant long-term growth prospects. With oil on the rise, shares could be worth a look.
Published on Oct 5, 2016
By Vinay Singh

Copyrighted 2016. Content published with author's permission.

Posted in ...