It has been about a month since the last earnings report for Continental Resources (CLR - Free Report) . Shares have added about 0.1% 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 the most recent earnings report in order to get a better handle on the important catalysts.
Continental Resources Q2 Earnings Toped on Surging Output
Continental Resources 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.
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).
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 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%.
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.
Continental Resources and Franco-Nevada Corporation 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.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. The consensus estimate has shifted -6.32% due to these changes.
At this time, Continental Resources has a great Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Continental Resources has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.