It has been about a month since the last earnings report for Continental Resources (CLR - Free Report) . Shares have added about 3% in that time frame, underperforming 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 drivers.
Continental Miss Q2 Earnings on Lower Crude Prices
Continental Resources reported second-quarter 2020 adjusted loss of 71 cents per share, wider than the Zacks Consensus Estimate of a loss of 63 cents. In the year-earlier quarter, the upstream energy player reported a profit of 59 cents per share.
Revenues of $175.7 million missed the Zacks Consensus Estimate of $254 million. Moreover, the figure declined from $1,208.4 million in the year-ago quarter.
The weak quarterly results were due to lower oil equivalent price realizations — caused by coronavirus-led dented energy demand — and curtailed production volumes. This was partially offset by lower operating expenses.
Production from continuing operations averaged 202,815 barrels of oil equivalent per day (Boe/d) for the quarter, lower than 331,414 Boe/d in the year-ago period. Production volumes declined due to 55% curtailed crude volumes in the second quarter in response to weak oil price environment.
Oil production for the quarter came in at 95,174 barrels per day (Bbls/d), down from 193,586 Bbls/d a year ago. Natural gas production fell from 826,969 thousand cubic feet per day (Mcf/d) in second-quarter 2019 to 645,846 Mcf/d.
Oil Equivalent Price Realization Falls
Crude oil equivalent price for the quarter fell to $7.88 per barrel from $36.03 in the prior-year quarter. Natural gas was sold at 12 cents per Mcf, down from $1.66 in the year-ago quarter. Moreover, average realized price for oil was $16.35 a barrel, down from $54.66 in the prior-year quarter.
Total Expenses Plunge
Total operating expenses of $472.4 million for the second quarter fell from $828.5 million in the June quarter of 2019. Total production cost fell to $64.7 million from $112.4 million in the year-ago quarter. Exploration costs for the quarter were $2 million compared with $3.1 million in the year-ago period. Transportation costs fell to $32.3 million from the year-ago level of $53.4 million.
Capital Expenditure & Balance Sheet
For second-quarter 2020, total capital expenditure (excluding acquisitions) was $190.8 million.
As of Jun 30, 2020, the company had total cash and cash equivalents of $6.7 million, down from $517.6 million at first quarter-end. It had long-term debt of $5,740.6 million (excluding current maturities), down from $5,964.6 million in the first quarter. It had a debt to capitalization of 46.6%.
With oil price improving in the past few months, Continental has provided its 2020 production and capital guidance. The company expects oil production in the range of 155-165 MBoe/d, down from the original guidance of 198-201 MBoe/d. Natural gas production is expected within 800-820 MMcf/d, down from the original estimate of 935-960 MMcf/d. For full-year 2020, it is expected to use 7.7 rigs, on average, on total net wells of 142.
Capital expenditure for full-year 2020 is estimated at $1.2 billion, reflecting a decline from the original guidance of $2.65 billion. Production expense for the year is expected within $3.50-$4.00 per Boe, the upper limit of which indicates a rise from the 2019 level of $3.58.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 13.58% due to these changes.
Currently, Continental Resources has a poor Growth Score of F, 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 second quintile 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.
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.