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Continental Resources (CLR) Up 32% Since Last Earnings Report: Can It Continue?

Zacks Equity Research
·4-min read

It has been about a month since the last earnings report for Continental Resources (CLR). Shares have added about 32% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Continental Resources due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

Continental Q1 Earnings Miss Estimates, Revenues Beat

Continental Resourcesreported first-quarter 2020 adjusted loss of 8 cents per share, wider than the Zacks Consensus Estimate of a loss of 3 cents. In the year-earlier quarter, the upstream energy player reported a profit of 58 cents per share. The underperformance can be attributed to lower oil equivalent price realizations – led by coronavirus-dented energy demand – partially offset by rise in production volumes.

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Revenues of $881 million beat the Zacks Consensus Estimate of $873 million. However, the figure declined from $1,124 million in the year-ago quarter.

Production Rises

Production from continuing operations averaged 360,841 barrels of oil equivalent per day (BOE/D) in the quarter, higher than 332,236 BOE/D in the year-ago quarter. This was supported by output growth at the company’s South and Bakken assets.

Oil production in the quarter came in at 200,671 barrels per day (Bbls/d), up from 193,921 Bbls/d a year ago. Natural gas production jumped from 829,891 thousand cubic feet per day (Mcf/d) in first-quarter 2019 to 961,022 Mcf/d.

Oil Equivalent Price Realization Declines

Crude oil equivalent price in the quarter fell to $24.44 per barrel from $35.56 in the prior-year quarter. Natural gas was sold at 90 cents per Mcf, down from $2.56 in the year-ago quarter. Moreover, average realized price for oil was $39.64 a barrel, down from $50.05 in the prior-year quarter.

Total Expenses Jump

Total operating expenses of $1,074.4 million in the first quarter rose from $819.3 million in the March quarter of 2019. Total production cost rose to $118.5 million from $106.9 million in the year-ago quarter. Exploration costs in the quarter were $11.6 million compared with $1.8 million in the year-ago quarter. Transportation costs rose to $60.5 million from the year-ago level of $49.1 million.

Capital Expenditure & Balance Sheet

In first-quarter 2020, total capital expenditure (excluding acquisitions) was $650.7 million. As of Mar 31, 2020, the company had total cash and cash equivalents of $517.6 million as well as debt of $5,964.6 million (excluding current maturities), with a debt-to-capitalization of 48.2%.

Guidance

Continental has withdrawn all guidance for 2020 owing to extreme volatility due to the coronavirus pandemic. Notably, the slump in energy demand owing to the outbreak has compelled oil producers to curtail production volumes across several operations.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in estimates revision.

VGM Scores

At this time, Continental Resources has a subpar Growth Score of D, however its Momentum Score is doing a lot better with an A. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Continental Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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