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Continental's (CLR) Q2 Earnings Miss on Lower Oil Prices

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Continental Resources, Inc. (CLR - Free Report) reported second-quarter 2019 adjusted earnings of 59 cents per share, which missed the Zacks Consensus Estimate by a penny. Moreover, the bottom line fell from the year-ago quarter earnings of 73 cents.

Revenues of $1,208.4 million beat the Zacks Consensus Estimate of $1,166 million. The figure also increased from $1,137.1 million in the year-ago quarter.

The weak quarterly earnings can be attributed to lower commodity price realizations and higher operating expenses. This was partially offset by higher year-over-year oil and gas production.

Continental Resources, Inc. Price, Consensus and EPS Surprise

Continental Resources, Inc. Price, Consensus and EPS Surprise

Continental Resources, Inc. price-consensus-eps-surprise-chart | Continental Resources, Inc. Quote

Production Surges

Production from continuing operations averaged 331,414 barrels of oil equivalent per day (BOE/D) in the quarter, higher than 284,059 BOE/D in the year-ago period. Oil production in the quarter came in at 193,586 barrels per day (Bbls/d), up from 157,116 Bbls/d a year ago.

Natural gas production jumped from 761,653 thousand cubic feet per day (Mcf/d) in second-quarter 2018 to 826,969 Mcf/d in the second quarter of 2019.

Price Realization Plunges

Average realized price for oil was $54.66 a barrel, down from $63.35 in the prior-year quarter. Natural gas was sold at $1.66 per Mcf, down from $2.65 in the year-ago quarter. Crude oil equivalent price in the quarter fell to $36.03 per barrel from $42.16 in the prior-year period.

Total Expenses Jump

Total operating expenses of $828.5 million in the second quarter rose from $745.8 million in the April-to-June quarter of 2018. Total production cost rose to $112.4 million from $90.2 million in the year-ago quarter. Exploration costs in the quarter were $3.1 million compared with $0.3 million in the year-ago period.

Production expense per barrel of oil equivalent in second-quarter 2019 was $3.74, higher than the year-ago figure of $3.49.

Increasing Value for Investors

The company authorized a share buyback program valued at $1 billion, effective second-quarter 2019. Till Aug 2, the company bought back 2.4 million shares valued at $92 million. The share repurchase program is expected to run through 2020.

Capital Expenditure

In second-quarter 2019, total capital expenditure (excluding acquisitions) was around $688.8 million, of which nearly 83% was used in exploration and development drilling.

Balance Sheet

As of Jun 30, 2019, the company had total cash and cash equivalents of $206.5 million, as well as debt of $5,767.3 million (excluding current maturities), with a debt-to-capitalization ratio of 45.8%.


Continental’s 2019 capital spending is expected to be $2.6 billion. For 2019, production of oil is expected in the range of 195,000-200,000 barrels per day, while that of natural gas is projected in the band of 820,000-840,000 thousand cubic feet per day. The company expects production expense for 2019 in the range of $3.50-$4.00 per BOE.

Continental plans to release seven rigs in the South region by the end of this year, owing to efficiency gains in Springer & Woodford.

Zacks Rank and Stocks to Consider

Currently, Continental has a Zacks Rank #3 (Hold). Some better-ranked stocks in the energy sector are given below:

Transportadora de Gas del Sur S.A. (TGS - Free Report) is a midstream energy firm. In the trailing four quarters, the company delivered average positive earnings surprise of 114%. The company has a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Halcón Resources Corporation is an upstream energy company. Its top line in 2019 is expected to improve nearly 31% from a year ago. The company has a Zacks Rank #1.

MPLX LP (MPLX - Free Report) provides midstream infrastructures to upstream companies. Its bottom line in 2019 is expected to improve 23.6% from a year ago. The company has a Zacks Rank #2 (Buy).

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