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Continental Resources (CLR) Q3 Earnings Beat on Higher Output

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Continental Resources, Inc. reported third-quarter 2018 adjusted earnings of 90 cents per share, beating the Zacks Consensus Estimate of 81 cents. Moreover, the bottom line skyrocketed from the year-ago quarter's earnings of 9 cents per share.

Revenues of $1,282.2 million surpassed the Zacks Consensus Estimate of $1,213 million and also surged from $726.7 million in the year-ago quarter.

The strong third-quarter results were supported by higher oil equivalent price realizations and increased production from the North Dakota Bakken, as well as SCOOP and STACK regions.

Continental Resources, Inc. Price, Consensus and EPS Surprise

Continental Resources, Inc. Price, Consensus and EPS Surprise | Continental Resources, Inc. Quote

Exploration and Production

Production from continuing operations averaged 296,904 barrels of oil equivalent per day (BOE/D) in the quarter, higher than 242,788 BOE/D in the year-ago quarter. Oil production in the quarter came in at 164,605 barrels per day (Bbls/d), higher than the year-ago period’s 140,611 Bbls/d. Notably, contribution of oil in the total production mix of Continental Resources is on the rise. Of the total production recorded in September, 57% was oil.

Natural gas production jumped from 613,060 thousand cubic feet per day (Mcf/d) in third-quarter 2017 to 793,793 Mcf/d in the third quarter of 2018.

In the North Region, production from the North Dakota Bakken was recorded at 161,008 BOE/D in the quarter, which rose from 129,582 BOE/D in the year-ago period. Production from Montana Bakken and Red River Units fell marginally year over year to 6,635 BOE/D and 8,989 BOE/D, respectively.

In the South Region, production from SCOOP increased to 63,270 BOE/D in third-quarter 2018 from 57,283 BOE/D in the prior-year quarter. Output from STACK rose to 56,129 BOE/D in the quarter under review from 35,619 BOE/D in the year-ago quarter.

Price Realization

Average realized price for oil was $65.78 a barrel, up from $43.27 in the year-earlier quarter. Natural gas was sold at $3.12 per Mcf, up from $2.74 in the year-ago quarter. Crude oil equivalent price in the quarter increased to $44.85 per barrel from $31.86 in the prior-year quarter.

Total Expenses

Total operating expenses of $790.8 million in the third quarter rose from $635 million in the July to September quarter of 2017. Total production cost rose to $103 million from $84.5 million in the year-ago quarter. Transportation costs in the quarter were $46 million, while the same were absent in the year-ago period.

Exploration expenses increased to $2.3 million in the quarter from $1.4 million in the year-ago period. Production expense per barrel of oil equivalent in the third quarter of 2018 was $3.77, lower than the year-ago period’s $3.82.

Capital Expenditure

In the third quarter of 2018, total capital expenditure (excluding acquisitions) came in at around $790.8 million, more than 80% of which was used in exploration and development drilling.

Balance Sheet

As of Sep 30, 2018, the company had total cash and cash equivalents of $12.9 million and debt of $6 billion (excluding current maturities), with a debt-to-capitalization ratio of 50.1%.

Guidance

Reiterated Guidance: Continental Resources’ 2018 capital spending (excluding acquisitions) is expected at $2.7 billion. For the full year, production is expected in the range of 290,000-300,000 BOE/D.

Updated Guidance: The company updated its production expense for the full year to the range of $3.50-$3.75 from the previous guidance of $3-$3.50 per BOE.

Zacks Rank & Other Key Picks

Currently, Oklahoma City, OK-based Continental Resources has a Zacks Rank #2 (Buy). Investors interested in the energy sector can also opt for other top-ranked stocks given below:

El Dorado, AR-based Murphy Oil Corporation (MUR - Free Report) carries a Zacks Rank #1 (Strong Buy). The company’s sales for 2018 are expected to grow more than 20% from 2017. You can see the complete list of today’s Zacks #1 Rank stocks here.

Brazilian state-run Petroleo Brasileiro S.A. or Petrobras (PBR - Free Report) has a Zacks Rank #2. Its earnings for 2018 are expected to surge more than 100% from the 2017 level.

Woodlands, TX-based Anadarko Petroleum Corporation holds a Zacks Rank #2. The company’s earnings for 2018 are expected to surge more than 250% year over year.

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