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Continental Resources (CLR) Q2 Earnings Top on Surging Output

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Continental Resources, Inc. (CLR - Free Report) reported second-quarter 2018 adjusted earnings of 73 cents per share, beating the Zacks Consensus Estimate of 70 cents. The bottom line was also higher than the year-ago quarter’s break-even earnings.

Revenues of $1,137.1 million surpassed the Zacks Consensus Estimate of $1,135 million and also surged from $661.5 million in the year-ago quarter.

The strong second-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 284,059 barrels of oil equivalent per day (BOE/D) in the quarter, higher than 226,213 BOE/D in the year-ago quarter. Oil production in the quarter came in at 157,116 barrels per day (Bbls/d), higher than the year-ago period’s 125,381 Bbls/d. Also, natural gas production jumped from 604,991 thousand cubic per day (Mcf/d) in second-quarter 2017 to 761,653 Mcf/d in the second quarter of 2018.

In the North Region, production from the North Dakota Bakken rose to 151,805 BOE/D in the quarter from 112,397 BOE/D in the year-ago period. In the South Region, a surge in production was witnessed from SCOOP (64,786 BOE/D in second-quarter 2018 from 61,107 BOE/D in the prior-year quarter) as well as STACK (51,722 BOE/D in the quarter under review from 31,934 BOE/D in the year-ago quarter).

Price Realization

The average realized price for oil was $63.35 a barrel, up from $41.91 in the year-earlier quarter. Natural gas was sold at $2.65 per thousand cubic feet (Mcf), up from $2.63 per Mcf in the year-ago quarter. This led to an increase in crude oil equivalent price to $42.16 per barrel from $30.31 in the prior-year quarter.

Total Expenses

Total operating expenses of $745.8 million in the second quarter rose from $690.5 million in the April-to-June quarter of 2017. Total production cost rose to $90.2 million from $82.5 million in the year-ago quarter. Transportation costs in the quarter were $47.3 million, while the same were absent in the year-ago period.

However, exploration expenses plunged to $303,000 in the quarter from $3.2 million in the year-ago period. Also, production expense per barrel for the second quarter of 2018 was $3.49, lower than the year-ago period’s $3.99 per Boe.

Capital Expenditure & Financials

In the second quarter of 2018, total capital expenditure (excluding acquisitions) came in at around $714.2 million.

As of Jun 30, 2018, the company had total cash and cash equivalents of $130 million and debt of $6.2 billion, excluding current maturities, with a debt-to-capitalization ratio of 52.3%.

Guidance

Continental Resources increased its 2018 capital spending (excluding acquisitions) guidance from $2.3 billion to $2.7 billion. For the full year, production is expected in the range of 290,000-300,000 BOE/D. The company anticipates its production expense for full-year 2018 in the range of $3-$3.50 per Boe.

Other News

Continental Resources and Franco-Nevada Corporation (FNV - Free Report) recently formed a strategic relationship. Through a stake divesture in minerals to Franco-Nevada, Continental Resources expects to receive around $220 million, which will close in the fourth quarter of 2018. For the next three years, the partnership plans to spend $125 million a year and acquire minerals. Per the deal, Continental Resources will pay 20% of the upcoming acquisitions by the partnership and get 25-50% of the revenues generated from the assets.

Zacks Rank & Key Picks

Currently, Oklahoma City, OK-based Continental Resources has a Zacks Rank #3 (Hold). Investors interested in the Energy sector can opt for some better-ranked stocks like Canadian Natural Resources Limited (CNQ - Free Report) and ConocoPhillips (COP - Free Report) , each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Calgary, Canada-based Canadian Natural Resources is an upstream energy company. The company’s top line for 2018 is anticipated to improve 35.9% year over year, while its bottom line is expected to increase 175%.

Houston, TX-based ConocoPhillips is an integrated energy company. The company’s top line for 2018 is likely to improve 14.1% year over year. In the last four reported quarters, the company delivered an average positive earnings surprise of 27.6%.

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